-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Vtp+grbe+Ex/Gy35nIFRLdf3ShsCqbxiBjW4c2crLW1BAzgcOlRwF8xPxCS3qjw/ PTJqcOthuGMZ21ptLVqF9A== 0000912057-94-003187.txt : 19940926 0000912057-94-003187.hdr.sgml : 19940926 ACCESSION NUMBER: 0000912057-94-003187 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940923 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MALLINCKRODT GROUP INC CENTRAL INDEX KEY: 0000051396 STANDARD INDUSTRIAL CLASSIFICATION: 2834 IRS NUMBER: 361263901 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00483 FILM NUMBER: 94550178 BUSINESS ADDRESS: STREET 1: 7733 FORSYTH BOULEVARD CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 314-854-5299 MAIL ADDRESS: STREET 1: 7733 FORSYTH BLVD CITY: ST. LOUIS STATE: MO ZIP: 63105-1820 FORMER COMPANY: FORMER CONFORMED NAME: IMCERA GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MINERALS & CHEMICAL CORP DATE OF NAME CHANGE: 19900614 10-K 1 FORM 10-K _______________________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF ----- THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 1994 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF ----- THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______ to __________________ Commission file number 1-483 MALLINCKRODT GROUP INC. (Exact name of registrant as specified in its charter) New York 36-1263901 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7733 Forsyth Boulevard St. Louis, Missouri 63105-1820 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 314-854-5200 ________________ Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered --------------------- ----------------------- 4% Cumulative Preferred Stock, par value $100 per share New York Stock Exchange Common Stock, par value $1 per share New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange 9 7/8% Sinking Fund Debentures due March 15, 2011 New York Stock Exchange 6% Notes due October 15, 2003 New York Stock Exchange 7% Debentures due December 15, 2013 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ________________ Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ ________________ State the aggregate market value of the voting stock held by non-affiliates of the registrant: $2,485,655,461 as of August 31, 1994. Market value is based on the August 31, 1994, closing prices of Registrant's Common Stock and 4% Cumulative Preferred Stock. APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares outstanding of each of the registrant's classes of common stock: 76,896,603 shares as of August 31, 1994. DOCUMENTS INCORPORATED BY REFERENCE: Information required by Items 10, 11, 12, and 13 of Part III is incorporated by reference from pages 3 through 14, pages 21 through 35, pages 11 and 12, and pages 9 through 11 and pages 13 and 14, respectively, of the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on October 19, 1994. ____________________________________________________________________ 1994 FORM 10-K CONTENTS Item Page ______________________________________________________________________________ Part I: 1. Business. 1 Introduction 1 General Factors Related To Business Segments 3 International Operations 3 Mallinckrodt Chemical 4 Mallinckrodt Medical 7 Mallinckrodt Veterinary 13 Other Activities 16 2. Properties. 19 3. Legal Proceedings. 20 4. Submission of Matters to a Vote of Security Holders. 22 Executive Officers of the Registrant 23 Part II: 5. Market for the Registrant's Common Stock and Related Stockholder Matters. 25 6. Selected Financial Data. 26 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 27 8. Financial Statements and Supplementary Data. 33 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 51 Part III: 10. Directors and Executive Officers of the Registrant. 51 11. Executive Compensation. 51 12. Security Ownership of Certain Beneficial Owners and Management. 51 13. Certain Relationships and Related Transactions. 51 Part IV: 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 52 Signatures 66 _______________________________________________________________________________ PART I. ITEM 1. BUSINESS INTRODUCTION COMPANY PROFILE Mallinckrodt Group Inc. (Mallinckrodt, the Company, or the Corporation) provides human and animal health care products and specialty chemicals worldwide by means of its three technology-based operating subsidiaries: Mallinckrodt Chemical, Mallinckrodt Medical and Mallinckrodt Veterinary. The Company was incorporated in New York in 1909 under the name International Agricultural Corporation. The corporate headquarters is located at 7733 Forsyth Boulevard, St. Louis, Missouri 63105-1820, and the telephone number is (314) 854-5200. TRANSITION OF THE COMPANY During the past several years, the Company has taken significant steps to develop its current composition of businesses as follows: - In February 1986, the Company, then called International Minerals & Chemical Corporation, purchased Mallinckrodt, Inc. for $675 million in cash. - In October 1986, the Company sold its gas and oil segment and its industrial products segment for $162 million. - From March 1987 through July 1989, the Company expanded its animal health business by acquiring Pitman-Moore, Inc., Coopers Animal Health and the animal health business of Glaxo Holdings for an aggregate $266 million in cash plus the assumption of certain liabilities. - In February 1988, IMC Fertilizer Group, Inc. (IFL), then a wholly owned subsidiary, completed an initial public offering (IPO) of shares of common stock. Until March of 1991, the Company owned 10 million shares of IFL common stock, less than a majority voting interest in IFL, and accounted for its investment in IFL by the equity method. In September 1988, the Company's holdings of IFL's Preferred Stock, Series A, were redeemed by IFL for $200 million. - In June 1990, shareholders approved changing the Company's name from International Minerals & Chemical Corporation to IMCERA Group Inc. 1 - In March 1991, the Company entered into a sale and option agreement with IFL under which IFL purchased, in three stages, all 10 million shares of IFL common stock which the Company owned for total net proceeds of $385 million. As of July 1991, the Company no longer owned any IFL shares. - In January 1992, Mallinckrodt, Inc., a wholly owned subsidiary of IMCERA Group, Inc., divided its principal operations to form two separate subsidiaries, Mallinckrodt Medical, Inc. and Mallinckrodt Specialty Chemicals Company. - In June 1993, the Company announced the details of a restructuring program which resulted in a charge of $242 million after taxes, most of which was for actions taken at Mallinckrodt Veterinary (then called Pitman-Moore). Further discussion is included in the Mallinckrodt Chemical and Mallinckrodt Veterinary business segment discussions and Note 1 of Notes to Consolidated Financial Statements (Notes). - On March 15, 1994, shareholders approved changing the Company's name from IMCERA Group Inc. to Mallinckrodt Group Inc. Simultaneous with the corporate name change, Mallinckrodt Specialty Chemicals changed its name to Mallinckrodt Chemical, Inc. and Pitman-Moore changed its name to Mallinckrodt Veterinary, Inc. - In March 1994, the Company moved its headquarters from Northbrook, Illinois to St. Louis, Missouri. - In June 1994, the Company announced the details of a restructuring program which resulted in a charge of $59 million after taxes, most of which relates to Mallinckrodt Medical. Further discussion is included in the Mallinckrodt Medical and Mallinckrodt Veterinary business segment discussions and Note 1 of the Notes. Other recent acquisitions, divestitures and continuing investments in each of Mallinckrodt's businesses are described in the discussions of the business segments, Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7, and Note 1 of the Notes. GENERAL POINTS In this report: Mallinckrodt Group Inc. and its subsidiaries, collectively, are called the "Company," the "Corporation," or "Mallinckrodt," unless otherwise indicated by the context. The Company has three business segments: Mallinckrodt Chemical, Mallinckrodt Medical and Mallinckrodt Veterinary. 2 The term "operating earnings" of a business segment represents that business segment's revenues, including sales to other Mallinckrodt business segments, less all operating expenses. Operating expenses of a business segment do not include interest expense, corporate income or expense, and taxes on income. All references to years are to fiscal years ended June 30 unless otherwise stated. Registered trademarks are indicated by an asterisk(*). GENERAL FACTORS RELATED TO BUSINESS SEGMENTS For a number of months, there have been extended discussions regarding the enactment of federal legislation directed towards what is commonly referred to as "health care reform." Numerous health care reform proposals have been introduced in the U.S. Congress, and various states have also introduced or enacted such reform measures. Mallinckrodt is unable to predict what effect any such legislation, if enacted, might have on its businesses. None of Mallinckrodt's business segments is dependent upon any single customer or supplier or group of related or affiliated customers or suppliers whose loss would have a material effect on its sales and operating results. In general, Mallinckrodt's business segments, including related working capital requirements, are not materially affected by seasonal factors. Mallinckrodt's business segments do not extend long-term credit to customers. The Company believes this non-extension of credit as well as its working capital requirements are not materially different from the credit policies and working capital requirements of its competitors. Competition with foreign and domestic manufacturers and suppliers in Mallinckrodt's business segments involves price, service, quality and the development of technology. Competition is strong in all markets served. Financial information about industry segments is included in Note 17 of the Notes. Financial information about foreign and domestic operations and export sales is included in Note 16 of the Notes. INTERNATIONAL OPERATIONS Foreign operations and investments are subject to risks customarily encountered in such operations and investments. Risks include fluctuations in currency exchange rates and controls, expropriation, and other economic, political, and regulatory policies of local governments, as well as laws and policies of the United States affecting foreign trade and investment. 3 Mallinckrodt sales outside the U.S. represented about 35 percent of consolidated net sales in 1994, 1993 and 1992. Products are manufactured and marketed through a variety of subsidiaries, affiliates and joint ventures around the world. See discussions of individual business segments included below; under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 27-32; and in Note 17 of the Notes for additional information. MALLINCKRODT CHEMICAL Mallinckrodt Chemical sales were:
(in millions) Years ended June 30, 1994 1993 1992(1) - -------------------------------------------------------------------- Net sales Ongoing operations Pharmaceutical Specialties $ 225 $ 212 $ 183 Catalysts, Performance & Lab Chemicals 212 183 185 ----- ----- ----- 437 395 368 Divested operations and flavors business(2) 73 - ---------------------------------- ----- ----- ----- $ 437 $ 395 $ 441 ----- ----- ----- ----- ----- ----- (1) Restated to reflect Chemical's reorganization effective July 1, 1992. (2) Includes sales of the divested cosmetic and electronic chemicals businesses and pre-joint venture sales of the flavors business.
Mallinckrodt Chemical, Inc. and its subsidiaries, collectively are called "Chemical," unless otherwise indicated by the context. Chemical's products are sold to a variety of markets. These products possess a higher degree of technology and service than is characteristic of commodity chemicals. Generally, Chemical's products are sold as chemical intermediates which are used by customers worldwide as components, ingredients or reagents, rather than as final consumer products. Many of Chemical's products are processed in multi-purpose manufacturing facilities. These products are also often subject to government regulation and industry standards, including FDA-mandated "Good Manufacturing Practice." Chemical's products include drug chemicals, peptides, high-purity performance chemicals, catalysts and laboratory chemicals. Through its 50 percent interest in the Tastemaker joint venture, Chemical also participates in the flavors business. 4 PHARMACEUTICAL SPECIALTIES Pharmaceutical specialties products include analgesics such as acetaminophen (APAP) used to control pain and fever; codeine salts and other opium-based narcotics and synthetic narcotics used to treat pain and cough; and peptides which are used in many new pharmaceuticals. Other pharmaceutical specialties products include narcotic/APAP combination products; Toleron* brand of ferrous fumarate which stimulates the formation of red blood cells; various salts and excipients; and Methodose* which is used for opiate addiction therapy and analgesia. Most pharmaceutical specialties products are sold to the pharmaceutical industry for use in the manufacture of dosage-form drugs. Narcotic prescription chemicals are also sold directly to drug wholesalers while opiate addiction products are primarily sold to government clinics. All pharmaceutical specialties are marketed by a direct sales force. In 1992, Chemical began manufacturing peptides at its St. Louis facility, and has performed appropriate facility construction and modification there in both 1994 and 1993. Peptides are also manufactured in Torrance, California. In 1992, a $16 million project was begun to expand APAP manufacturing and waste-treatment capacity at the Raleigh, North Carolina, facility. When complete early in 1995, APAP capacity is expected to increase 25 percent while lowering unit cost. The Derbyshire, England para-aminophenol (PAP, a precursor of APAP) manufacturing plant is running at double its former capacity following an expansion there in 1992. In 1993, Chemical acquired Contech Laboratories, a facility located in Greenville, Illinois which had performed certain processing steps relating to the manufacture of Compap* and other products. Chemical has expanded these facilities to manufacture and process additional products and forms. In 1992, work also began on an approximately $9 million project to expand and upgrade the narcotics facility in St. Louis, Missouri, which is expected to be completed early in 1995. CATALYSTS, PERFORMANCE & LAB CHEMICALS Catalysts, produced in Erie, Pennsylvania, are sold to the petrochemical and food industries. They include such products as platinum and palladium on carbon or alumina substrates; copper chromite; tableted, flaked and droplet shapes of nickel catalysts; and a variety of custom catalysts. Such catalysts are used to manufacture plasticizers, detergents, rubber products, insecticides, synthetic motor oil and edible fats and oils. Catalysts are marketed directly by Chemical under the registered trademark Calsicat. In 1994, Chemical acquired Catalyst Resources, Inc., a manufacturer of polymerization catalysts based in Pasadena, Texas. Catalyst Resources produces custom and proprietary catalysts for manufacturers of 5 polypropylene and polyethylene. Catalyst Resource products are marketed by a direct sales force, with a large percentage of sales to international customers. High-purity performance chemicals sold to industrial consumers include such products as calcium stearates and other metal soaps for use as internal lubricants to facilitate the manufacture of molded and extruded plastics; high performance monomers and several plastic additives and customized additive blends for use as processing aids in the production of polymers; and potassium chloride for use as a "salt substitute" in low-sodium diets. Chemical sells these products through distributors and its sales force. Laboratory chemical products include high-purity reagent chemicals used in research and development and analytical laboratories. These high-purity products consist of hundreds of reagent chemicals sold through distributors and a direct sales force to medical, industrial, educational and governmental laboratories. Laboratory chemicals are manufactured in Paris, Kentucky. JOINT VENTURE In February 1992, a 50/50 joint venture partnership was formed with Hercules Incorporated to manufacture and market flavor products. The venture, named Tastemaker, was created by combining Chemical's Fries & Fries flavors business with Hercules' PFW Flavors and Citrus Specialties businesses. Tastemaker is headquartered in Cincinnati, Ohio, and has a major presence in the world's three largest flavors markets -- Europe, North America and Asia/Pacific. It manufactures products for use in convenience foods and beverages; dry and liquid beverage mixes; cordials, cocktails and wines; ice cream, cheese and other dairy products; cake and cookie mixes, snacks and other bakery products; main meals and entrees; and pharmaceutical products. Production and distribution of these products are subject to regulation by various country agencies. Tastemaker manufacturing facilities are located in Barneveld, Netherlands; Cincinnati, Ohio; Mexico City, Mexico; Milton Keynes, United Kingdom; Sydney, Australia; and Lakeland, Florida. Distribution is primarily through direct sales forces and distributors. OTHER During the last three years, Chemical has made several major changes in its business in addition to the changes discussed above. It combined its science products and performance chemicals businesses and consolidated its European operations under its Catalysts, Performance and Lab Chemicals Group as part of a 1992 reorganization. In 1992, Chemical divested its cosmetic and electronic chemicals businesses and 6 exited a general-line chemical business. In 1993, the European operations were realigned between the Pharmaceutical Specialties and Catalysts, Performance and Lab Chemicals Groups along product lines. The restructuring program begun in 1993 is producing anticipated results with the exit of the aromatic flourial intermediates business substantially competed in 1994 and the exit of the photochemicals business expected to be substantially completed in 1995. In the interim, the company continues to operate its Dieburg, Germany photochemical manufacturing facility. MALLINCKRODT MEDICAL Mallinckrodt Medical sales were:
(in millions) Years ended June 30, 1994 1993 1992 - ------------------------------------------------------------------------ Net sales Radiology & Cardiology $ 436 $ 382 $ 294 Nuclear Medicine 186 182 160 Anesthesiology & Critical Care 290 219 166 - -------------------------------- ----- ----- ----- $ 912 $ 783 $ 620 ----- ----- ----- ----- ----- -----
Mallinckrodt Medical, Inc. and its subsidiaries, collectively are called "Medical," unless otherwise indicated by the context. Medical products are instrumental in the delivery of health care services and are sold to hospitals, clinical laboratories and other customers on a worldwide basis. They are related by a high degree of innovation and technology, by regulation from agencies such as the U.S. Food and Drug Administration (FDA) and by markets served. They are significantly affected by conditions within the health care industry, including continuing legislative initiatives and public and private health care insurance and reimbursement programs. An aging population and demand for technologically superior products to improve the quality of life and lower the cost of care are two major factors fueling growth within the industry. Medical provides advanced, innovative products for radiology, cardiology, nuclear medicine, anesthesiology and critical care. Principal products of this industry segment are contrast media for various imaging modalities, radiopharmaceuticals for medical diagnostic procedures, and disposable medical devices and instruments and systems for use in surgical procedures, critical care and alternate site facilities. During 1994, Medical conducted studies to develop strategies to effectively respond to customer needs and compete in a market that is 7 changing rapidly as the result of health care reform. As a result of these efforts, in the fourth quarter Medical announced a pre-tax charge of $74 million related to the reengineering process. The key components of the charge include the reorganization of the current medical specialty oriented U.S. sales structure into a unified sales organization divided into geographical districts; reorganization to reduce, centralize and standardize certain non-sales related functions and management processes; relocation of the Argyle, New York tracheal tube manufacturing operations to existing plants in Athlone, Ireland and Irvine, California, and a new facility to be built in Juarez, Mexico; and severance costs related to an associated work-force reduction. The process of restructuring the U.S. sales force addresses new alliances being created on a market-by-market basis and the changing dynamics of existing customers' decision-making processes. Medical has begun the process of consolidating its five divisional sales units into one team that reports through a senior vice president to the chief executive officer, thereby increasing responsiveness by reducing levels of authority. The consolidation also creates 12 geographic regions to improve planning and strategy development on a local basis. And while it will continue to emphasize contact with the clinical community within its customer base, the new sales structure will create a single point of contact with each purchasing entity, providing quicker, more efficient and effective customer service. Pre-tax cash expenditures for this restructuring should approximate $65 million, consisting of $28 million for severance costs for about 500 people at various locations around the world, $15 million for consulting, $13 million for manufacturing rationalization and $9 million for other items. Approximately $50 million of the expenditures will occur in 1995. The non-cash pre-tax portion of the charge should approximate $9 million, primarily relating to manufacturing rationalization. An additional $34 million of capital spending will be incurred relating to information systems and manufacturing rationalization. The majority of actions under this program are expected to be completed in one year. Annual pre-tax savings from the restructuring will be approximately $40 million, with partial benefit in 1995 and most of the savings achieved in 1996. The restructuring should allow Medical to remain flexible to address future change, reduce costs, remain competitive and sustain a strong market presence. 8 RADIOLOGY & CARDIOLOGY Radiology products include iodinated contrast media (ionic and nonionic) and catheters for use in studies of the brain, abdominal organs, renal system, peripheral vascular system and other areas of the body to aid in diagnosis and therapy. In 1994, these products were marketed principally by a divisional direct sales force, which will be consolidated within the geographically organized sales force pursuant to Medical's restructuring. Since its introduction in the U.S. five years ago, Optiray*, a low osmolar, nonionic medium, has been widely accepted in both radiology and cardiology indications. Optiray* began to be introduced outside the U.S. in 1991. To source growing Optiray* volumes in the international market, the company opened a new production facility in Dublin, Ireland during the year, for the manufacture of Optiray* in its bulk drug form. In addition, a capacity expansion at Medical's existing plant in St. Louis, Missouri has been completed. In June 1990, Medical introduced Ultraject*, a patented innovation in contrast media agent administration. This prefilled syringe provides radiologists a more efficient, convenient and safer method of delivering contrast agents. Ultraject* continues to fuel the growth of Optiray* in the imaging market as it provides a significant market edge over traditional glass syringes because it reduces the potential for both dosage error and handling hazards. The cardiology business is directed toward meeting the needs of both invasive and non-invasive cardiologists in diagnosing and treating diseases of the heart and the cardiovascular system. The business currently offers both ionic and nonionic contrast agents, and interventional catheters and related supplies. These products are sold directly to hospitals, primarily by a dedicated sales force which will be consolidated within Medical's new geographically organized sales force. During 1989, Medical acquired an equity position (since unchanged) of less than two percent of the then currently outstanding common shares of Molecular Biosystems, Inc. of San Diego, California, and obtained exclusive marketing rights in the Western Hemisphere for Albunex*, a new ultrasound contrast agent. Albunex* was unanimously recommended for approval by the Radiology Device Advisory Panel of the FDA in July 1992. Molecular Biosystems received an approvable letter for Albunex* from the FDA in April 1994. Final approval was received early in August 1994 with Medical's launch of the product anticipated in the second quarter of 1995. During 1993, Medical reached an agreement with Peripheral Systems Group ("PSG"), a division of Eli Lilly and Company, to obtain exclusive, worldwide distribution rights for a broad line of interventional radiology and cardiology products manufactured by PSG. Medical started North American distribution in 1993 and began full distribution in Europe, Japan and Latin America in the third quarter of 1994. 9 Medical's largest developmental effort in this area is directed toward contrast agents for magnetic resonance imaging, primarily in neurology, oncology and cardiovascular applications. At June 30, 1994, radiology and cardiology manufacturing facilities were located in Angleton, Texas; Raleigh, North Carolina; St. Louis, Missouri; Quebec, Canada; Mulhuddart, Ireland; and Mexico City, Mexico. NUCLEAR MEDICINE The nuclear medicine business consists of radiopharmaceuticals used to provide images of numerous body organs' anatomy and function, and to diagnose and treat diseases. Nuclear medicine products are sold to hospitals and clinics in the U.S. by both a direct sales force, which will be consolidated within Medical's geographically organized sales force, and through a nationwide network of nuclear pharmacies. Internationally, marketing will continue through direct sales forces and distributors. Health physics consulting services are also provided to hospitals. In June 1994, the FDA authorized U.S. marketing of OctreoScan*. This unique radiopharmaceutical will assist physicians in diagnosing and determining the extent of spread in certain types of cancers, using a non-invasive procedure instead of surgical biopsy. OctreoScan* will be manufactured at facilities in St. Louis, Missouri and Petten, Netherlands. Introduction of the product began in June 1994 through key hospitals specializing in cancer treatment. Marketing of the product has been expanded upon FDA approval of promotional material. In 1990, Medical introduced TechneScan* MAG3* for improved imaging of the kidneys and the renal system. Unlike a standard x-ray based imaging procedure, a nuclear medicine scan utilizing MAG3* can accurately assess renal tubular function in addition to providing anatomical information. In 1991, the company introduced the highly successful UltraTag* RBC blood pool imaging kit which is used for gated blood pool, "first pass" cardiac studies, and for the detection of hemangiomas and gastrointestinal bleeding sites. In order to meet growing worldwide demand for cyclotron-produced products, Medical is currently expanding cyclotron capacity at its radiopharmaceutical production facility in Maryland Heights, Missouri. Medical also brought a new cyclotron on-line at Petten, Netherlands, in 1993. Medical is also expanding the Maryland Heights, Missouri manufacturing facility to introduce an improved generator product. Additionally, during 1992, Medical signed an agreement with the Netherlands Energy Research Foundation to construct a plant in Petten 10 dedicated to the manufacture of molybdenum-99 (Mo99), a key raw material used in the production of the nuclear medicine imaging product technetium-99m. Full production is expected to begin by the end of 1995. Current research efforts in this area are directed to development of compounds to alleviate cancer-related bone pain, detect several types of cancer, and evaluate heart disease. At June 30, 1994, nuclear medicine manufacturing facilities were located in Maryland Heights, Missouri and Petten, Netherlands. Medical owns these facilities. The company also operates 33 nuclear pharmacies located in population centers throughout the U.S. ANESTHESIOLOGY & CRITICAL CARE Anesthesiology products include continuous core temperature monitoring systems; convective warm air temperature management systems; tracheal tubes, tracheostomy tubes, breathing systems, and other disposables; and airway management products. Continuous core temperature monitoring and temperature management systems are utilized both in surgical procedures and postoperatively. In 1993, Medical expanded its airway management product line by acquiring the tracheostomy products business of Sorin Biomedical in Irvine, California. The airway management product line consists of basic and specialty tracheal tubes used in hospitals for maintaining a secure airway during anesthesia and intensive care and tracheostomy tubes which are used in hospitals and alternate site facilities for maintaining airways during respiratory care. Anesthesiology products are marketed directly and through distributors in the U.S. The direct sales force will be consolidated within Medical's new geographically organized sales force. Internationally, airway and temperature systems are marketed directly and through distributors. In 1994, Medical acquired DAR S.p.A. of Mirandola, Italy to complement its tracheal and tracheostomy tube business and expand the core airway management business into related anesthesia and respiratory disposables. DAR products include disposable filters, heat/moisture exchanges, masks and breathing circuits used in operating rooms and intensive care units to provide respiratory support to critically ill patients. Current distribution channels will be changing to support DAR products worldwide market potential. In 1994, Juarez, Mexico became the new production base for the temperature monitoring systems products used in emergency and critical care settings. Medical is capitalizing on the rapid conversion to disposable tracheal tubes in Europe by expanding its anesthesiology products plant in Athlone, Ireland. Also, as previously discussed, a portion of the Argyle, New York tracheal tube manufacturing operations will be relocated to a new facility to be built in Juarez, Mexico. In critical care, Medical provides instruments and systems to analyze blood gases and electrolytes, and systems for blood hemoglobin and 11 glucose analysis. GEM*-STAT is designed for use in low-volume intensive care units, while GEM*-6 provides testing in the operating room, primarily for cardiovascular surgery. The GEM* Premier is a user friendly product which has a high capacity and is more cost-effective than competing whole-blood analyzers. The GEM* Premier is utilized in intensive care units as well as in hospital stat and central laboratories. These products are sold directly to hospitals in the U.S. and through direct sales forces and distributors in international markets. During 1993, Medical acquired the HemoCue businesses, HemoCue A.B. of Angelholm, Sweden and HemoCue Inc. of Mission Viejo, California, to complement the GEM system's point of care blood analysis product line. HemoCue products include blood hemoglobin and glucose analysis systems for use in hospitals and alternate site markets. These products are distributed directly and through distributors in the U.S. and internationally. The U.S. direct sales force will be consolidated within Medical's new geographically organized sales force. At June 30, 1994, anesthesiology and critical care manufacturing facilities were located in Carlsbad, California; Santa Ana, California; Argyle, New York; Irvine, California; Ann Arbor, Michigan; Vitrolles, France; Athlone, Ireland; Mirandola, Italy; Juarez, Mexico; and Angelholm, Sweden. Medical owns the Argyle, Athlone and Mirandola facilities. The remainder are leased. At June 30, 1994, the company had distribution locations in Mission Viejo, California; Victoria, Australia; Vienna, Austria; Bruxelles, Belgium; Quebec, Canada; Evry Cedex, France; Gemenos, France; Hennef, Germany; Tokyo, Japan; Mexico City, Mexico; Petten, Netherlands; Athlone, Ireland; Catano, Puerto Rico; Madrid, Spain; Zurich, Switzerland; Northampton, United Kingdom; Milan, Italy; and Singapore. Medical owns the facilities in Athlone, Quebec, Mexico City and Petten. The remainder are leased. 12 MALLINCKRODT VETERINARY Veterinary sales were:
(in millions) Years ended June 30, 1994 1993 1992 - ----------------------------------------------------------------- Net sales Pharmaceuticals $ 249 $ 258 $ 285 Biologicals 95 105 104 Feed Ingredients 162 169 172 Veterinary Specialties & Other 86 86 81 - -------------------------------- ----- ----- ----- $ 592 $ 618 $ 642 ----- ----- ----- ----- ----- -----
Mallinckrodt Veterinary, Inc. and its subsidiaries, collectively are called "Veterinary," unless otherwise indicated by the context. Veterinary initiated the restructure of its global operations during 1993 to improve operating earnings and growth potential by strengthening its global distribution and marketing capabilities and consolidating manufacturing facilities to improve worldwide product sourcing and increase plant utilization. To date, approximately 1,000 positions have been eliminated, nearly 500 of which were eliminated during 1994; 10 manufacturing facilities have been closed; more than 200 low margin products have been dropped from the lines offered by the company; commercial and administrative functions have been streamlined, including the consolidation of most of the research and development operations to one global facility located near the corporate headquarters; and Veterinary has exited non-core businesses and high risk development projects that have diminished in potential, including a project for the development of a porcine somatotropin (PST) product under the name Grolene*. Veterinary ranks in the top five companies in the animal health industry worldwide in terms of sales, and continues to have direct presence in the top 25 animal health markets of the world, with more than half its net sales originating outside the U.S. Veterinary focuses on four strategic segments, or two-thirds, of the $12 billion market for animal health products; pharmaceuticals, biologicals, veterinary specialties and feed ingredients. Veterinary's operations support a product line approaching 1,000 products. Its strategy calls for selective additions of new products and for geographic expansion into new markets. Specifically, it intends to focus on improving its leading positions in North America, the United Kingdom, Australia, New Zealand and Brazil, and to increase market share in Germany, France, Japan, Mexico and Spain. Veterinary also sees growth potential in less developed nations such as China. Veterinary continues to focus its efforts on product areas 13 that offer the greatest opportunities. Consequently, Veterinary expects to continue to derive most of its sales and profit from the food animal sector, while selectively developing product lines in the companion animal market, and through specialty distribution. In the worldwide animal health industry, products for food animals comprise nearly 80 percent of the market. Approximately 85 percent of Veterinary's revenues are from products used for food animals. Cross registration, or filing for approval of products already marketed in other countries, is a key component of Veterinary's geographic expansion efforts. Approximately 350 product approvals have resulted from cross- registration through 1994, with additional approvals expected over the next three to five years. Operations are currently located in more than 30 countries, with distribution networks in more than 100 nations. Veterinary's organizational structure (three geographic regions and the Feed Ingredient business) is aligned for increased market focus and customer responsiveness and enables it to sell directly to the consumer, veterinarian, distributor, dealer or agent, depending on the maximum market opportunity. PHARMACEUTICALS The pharmaceutical business segment includes productivity enhancers, ectoparasiticides, and antimicrobials. The worldwide market for productivity enhancers is $200 million. Veterinary's strategy is to strengthen its position through product line extensions. Ralgro*, Veterinary's long-established and consistent performer, is the leading growth promotant for cattle on grass in the U.S. The product is also marketed in a number of Latin American and other countries. Ralgro received U.S. Food and Drug Administration approval in 1994 for use in heifer calves intended for reproduction. This expanded applicability is expected to help simplify the implant process for beef producers. The world market for parasiticides is $2 billion. Veterinary is one of the leading companies in this market, and offers a wide range of food animal products such as pour-ons, sprays and eartags. Defend* EXspot*, a topical flea control product for dogs that also protects against deer ticks (carriers of organisms that cause Lyme disease), is marketed in the U.S. and many countries throughout the world with recent approvals and launches in France and Norway. 14 Veterinary participates extensively in the $1.9 billion global antimicrobial market, which includes antibacterial and antifungals. Its strategy calls for investment to maintain and selectively expand its presence. A broad-spectrum antibacterial sold under the brand names Zaquilan* and Diprinovet* was introduced in 1993, primarily in the United Kingdom, Ireland and Scandinavia for food and companion animals. It continues to gain customer acceptance while awaiting regulatory approvals in the remainder of Europe. Other products include Cepravin*, an intramammary antibiotic for dairy cattle; Butalex*, a unique treatment for theilerosis in cattle; and Clinafarm*, an antifungal for poultry hatcheries. At June 30, 1994, pharmaceutical manufacturing facilities were located in Baton Rouge, Louisiana; Terre Haute, Indiana; Bray, Ireland; Friesoythe, Germany; Cali, Columbia; Kuala Lumpur, Malaysia; and Manila, Philippines. BIOLOGICALS Veterinary's strategic plan has identified biologicals as the primary focus of its development efforts, and it already has a leading position in this market. Biologicals, which include primarily vaccines, represents a current world market of $1.8 billion that is growing at an annual rate of about five to eight percent, making it the fastest growing segment of the animal health industry. In 1994, Veterinary committed to a biological production facility to be built in Raleigh, North Carolina. The $31 million, 63,000 square-foot plant is expected to begin commercial production in 1997 and will produce livestock and companion animal vaccines for distribution around the world. Veterinary has two other global biological production facilities, in Upper Hutt, New Zealand, and Burgwedel, Germany, which were completed in 1992 at a total cost of $37 million. These three plants are expected to allow Veterinary to maintain a competitive position in this industry segment as well as aid in the development of new global vaccines and innovative delivery systems. Veterinary entered into a global technology and product exchange agreement with Boehringer Ingelheim Animal Health, Inc., St. Joseph, Missouri, in August, 1994. The agreement provides for Veterinary to immediately begin marketing and distributing certain Boehringer Ingelheim cattle respiratory vaccines in the United States under the Strategy* brand name. The agreement also provides Veterinary with respiratory vaccine antigens and technology which are expected to enable it to develop second-generation vaccines with enhanced duration, effectiveness and safety. Among Veterinary's vaccines are Coopervax*, a vaccine for the prevention of foot and mouth disease in cattle and sheep; Coccivac* and Paracox*, leading vaccines that prevent poultry coccidiosis by stimulating the immune 15 system; Cattlevax*, a combined leptospirosis/clostridial vaccine for cattle; and Footvax*-M vaccine for control of foot rot in sheep. Paracox* is marketed primarily in Europe, and Coccivac* primarily in the Americas and Asia. Both vaccines are pending approval in other countries. Other biological manufacturing facilities at June 30, 1994 were locatd in Compton, United Kingdom; Sao Paulo, Brazil; Linque, Paraguay; and Millsboro, Delaware. VETERINARY SPECIALTIES AND OTHER In the $1.1 billion worldwide veterinary specialties market, Veterinary is a leading supplier of prostaglandins, anesthetics and surgical products. Extensive use of Veterinary's product distribution capabilities by companies such as Johnson & Johnson and Zeneca strengthens Veterinary's position in this market. Veterinary also participates in the $535 million anticoccidial market with the product Clinacox*, an anticoccidial for chickens and turkeys. Clinacox* is marketed in Canada and Latin America and is awaiting regulatory approval in the U.S. FEED INGREDIENTS Participating in a $1 billion worldwide market, Feed Ingredients contributes more than 25 percent of Veterinary's total sales. Veterinary has a strong brand position in this market with feed supplements such as Monofos*, Biofos*, Dynafos*, Multifos*, Dyna-K* and Dynamate*. Veterinary owns a feed phosphate plant adjacent to the phosphate chemical complex of IMC Fertilizer Group, Inc. (IFL) in New Wales, Florida. Under an agreement which expires in 1997, IFL operates the Veterinary plant. Veterinary also contracts with IFL for key raw materials including phosphoric acid and phosphate rock. IFL also supplies Veterinary's requirements of animal feed-grade potassium products. Veterinary believes there are adequate sources of supply from other producers in the event these supply agreements are not renewed. OTHER ACTIVITIES RESEARCH AND DEVELOPMENT The Company performs applied research directed at development of new products, development of new uses for existing products, and improvement of existing products and processes. Research and development programs 16 include laboratory research as well as product development and application. Mallinckrodt Chemical research and development efforts are organized within its operating divisions to focus technical resources on the development of new and improved products meeting defined market and customer needs. Technical personnel for process support are located at each manufacturing location. Internal research effort is supplemented with third-party and university technical agreements. Mallinckrodt Medical research and development efforts are coordinated on a worldwide basis by a senior scientist. Research and development of imaging and therapeutic products are carried on by a centralized organization. Research and development for anesthesia and critical care are performed within these businesses. Mallinckrodt Medical's various development activities are focused on market-place needs. Internal research effort is supplemented with third- party and university technical agreements. Mallinckrodt Veterinary currently has many products under development that address the needs of world and regional markets. The company consolidated its primary research and development capabilities at a single site in the Chicago, Illinois area in 1993, in conjunction with the restructuring of its businesses. Products in development include vaccines, growth enhancers and parasiticides for livestock, poultry and companion animals. To supplement its own research, Mallinckrodt Veterinary has technical agreements with various pharmaceutical and biotechnology companies and universities. PATENTS, TRADEMARKS, AND LICENSES Mallinckrodt owns a number of patents and trademarks, has a substantial number of patent applications pending, and is licensed under patents owned by others. No single patent is considered to be essential to the businesses as a whole, but in the aggregate, the patents are of material importance to the Company's business. ENVIRONMENTAL AND OTHER REGULATORY MATTERS The Company is subject to various environmental protection and occupational safety and health laws and regulations in the United States and foreign countries in which it operates. In addition, in its operations, currently and over the years, the Company has handled, and will continue to deal in or otherwise handle, materials and wastes classified as hazardous or toxic by one or more regulatory agencies. The Company is also subject to the Federal Food, Drug, and Cosmetic Act, other federal statutes and 17 regulations, various state statutes and regulations, and laws and regulations of foreign governments, affecting and involving testing, approval, production, labeling, distribution, post-market surveillance and advertising of most of the Company's existing, new, and prospective products. Significant capital expenditures, as well as operating costs, have been incurred on account of the laws and regulations governing the protection of the environment, occupational safety and health, and the handling of hazardous materials. There are inherent and unquantifiable risks in mishandling, or potential accidents involving, hazardous or toxic materials and wastes. On the basis of its best information and belief, the Company does not believe the expenditures and risks occasioned by these circumstances have as yet become materially adverse to its operations or financial condition taken as a whole; however, no assurance can be given that this will continue to be true. Similarly, the interpretation and enforcement of the laws and regulations pertaining to the Company's products or facilities by government agencies, such as the U.S. Food and Drug Administration and the U.S. Environmental Protection Agency, and state and foreign counterparts, at any particular production site or in connection with any particular product or any proposed new or modified product, may be more strict than anticipated, and could result in production interruption and product holds or recalls. The Company endeavors to comply with all of these laws and regulations, as well as with all other applicable laws and regulations, but there can be no assurance compliance will always be achieved. Instances of non-compliance have occurred in the past and although they have not had a material adverse impact on the Company, such instances could occur in the future and possibly have a material adverse impact. In particular, the Company is unable to predict the extent to which it may be adversely affected by future regulatory developments such as new or changed laws or regulations. Most of the Company's environmental related capital expenditures are in response to provisions of the Federal Clean Air Act, Water Pollution Control Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act, land use, air, and water protection regulations of the various localities and states, and their foreign counterparts. Capital expenditures worldwide relating to air emission control, wastewater purification, land reclamation and solid waste disposal totaled approximately $15 million in 1994 and $20 million in 1993. The Company currently estimates that environmental capital expenditures 18 over the next two years will average about $25 million per year. Environmental clean up costs are often incurred over extended periods of time. Nevertheless, to the extent these costs can be reasonably estimated, and the Company's responsibility is probable, accruals are established although the costs are not yet payable, and are reflected in the Company's consolidated financial statements. See also Item 3., Legal Proceedings, and Note 19 of the Notes for additional information. EMPLOYEES Mallinckrodt had 10,200 employees at June 30, 1994, consisting of 6,100 U.S. based employees and 4,100 employees outside the U.S. Employees by business segment are: Mallinckrodt Chemical, 2,435; Mallinckrodt Medical, 5,200; and Mallinckrodt Veterinary, 2,500. Sixty-five employees are engaged in corporate activities. LABOR RELATIONS In the U.S., the Company has eight collective bargaining agreements with eight U.S. international unions or their affiliated locals covering 650 employees. Five agreements covering 495 employees were negotiated during 1994, all with no work stoppages. No agreements will expire in 1994. Eleven Mallinckrodt Medical and Mallinckrodt Chemical operating locations outside the U.S. have collective bargaining agreements and/or work counsel agreements covering approximately 1,055 employees. Mallinckrodt Veterinary operating locations outside the U.S. have eight collective bargaining agreements and/or work counsel agreements covering approximately 313 employees. Recent wage and benefit increases were consistent with competitive industry and community patterns. ITEM 2. PROPERTIES Information regarding the principal plant and properties of Mallinckrodt is included in the respective business segment discussions in Item 1., Business. Additionally, at June 30, 1994 Mallinckrodt Medical and Mallinckrodt Veterinary occupy office and laboratory space owned by those companies in St. Louis, Missouri and Mundelein, Illinois, respectively. Mallinckrodt Chemical and Mallinckrodt Group lease office space in St. Louis, Missouri. 19 The Company believes its manufacturing and distribution facilities at June 30, 1994 are adequate, suitable and of sufficient capacity to support its current operations. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in a number of legal proceedings in which liabilities are sought to be imposed on it. The Company believes that the currently pending matters, which are largely related to federal, state, and local environmental and pollution control statutes, and which in most cases relate to discontinued operations of the Company, will not have a material adverse effect on its financial condition or the results of the Company's operations. Those matters required by Securities and Exchange Commission rules to be reported here or that could be regarded as potentially material are as follows: ENVIRONMENTAL MATTERS Auburn Hills, Michigan -- As first reported in 1986, the Company was named as a defendant in two cases brought by the State of Michigan in the United States District Court in Detroit, Michigan in 1986, involving a drum recycling facility in Auburn Hills, Michigan. The City of Pontiac has also intervened as an additional plaintiff. The Company has filed a third-party complaint against approximately 110 parties that sent drums to the recycling facility, seeking contribution for damages that might be assessed against the Company. The court has not held any hearings concerning this case since Spring 1987 and has stayed all third-party proceedings. A settlement in principle reached in 1991 by the Company with the State was not finalized. The State has entered into a Consent Order with some 40 de minimis Potentially Responsible Parties (PRP's), resolving their liability for the site. The State has completed its Remedial Investigation and Feasibility Study for the site and after the study is made available for public comment, the State will indicate its remedy for the site. Until the State selects its preferred remedy, it is not possible to estimate the cleanup costs for the site. Ashtabula County, Ohio -- As first reported in 1985, this matter involves a claim by the United States Environmental Protection Agency ("EPA") against the Company and other companies concerning the alleged pollution of a stream near Ashtabula, Ohio, designated as "Fields Brook," where the Company once operated a plant. The Company and several other companies have settled the litigation brought by EPA and all of the companies have agreed to nonbinding arbitration of the allocation of payment for a Remedial Design/Remedial Action study ordered by EPA. This arbitration and proceedings to add third parties as defendants are in process and the arbitrator's decision is expected in October 1994. Although the Company's allocable share of cleanup costs cannot be determined at this time, the Company continues to believe this proceeding will not have a material adverse effect on its financial position or results of operations. 20 Orrington, Maine -- As first reported in 1989, Hanlin Group, Inc. filed a complaint in the United States District Court for the District of Maine against the Company in April 1989 relating to a chemical manufacturing facility located in Orrington, Maine that was purchased from the Company. Hanlin alleged that the Company operated the facility in violation of state and federal environmental laws and that the Company illegally caused carbon tetrachloride and chloroform contamination at the facility. As previously reported, the Company and Hanlin settled the claims relating to the Orrington plant in 1991. The facility has since been sold to Holtrachem Manufacturing Company, L.L.C., with the settlement agreement assigned to them as part of the sale. Pursuant to the terms of the settlement, the Company is to pay specified costs of a study ordered by the EPA. Following the completion of all required studies, the parties will attempt to reach an agreement concerning the sharing of costs or remediation; if they cannot reach agreement, the matter will be referred to binding arbitration. The Company is not able to estimate its exposure for all study and cleanup costs at this time. Allentown, Pennsylvania -- In September 1993, the Whitehall Township Authority ("WTA") asserted claims against Trimet Technical Products, Inc., a subsidiary of the Company, alleging that Trimet's facility in Allentown, Pennsylvania had contaminated one of the WTA water supply wells. WTA has purchased water from a neighboring system to replace water from the contaminated well, which has been closed since November 1990. From November 1990 through December 1992, Trimet reimbursed WTA for the cost of purchasing alternative water supplies based on the average pumping rate for the contaminated well in the year before it was closed. From January 1993 through present, Trimet has reimbursed WTA for its actual water purchases. Trimet is also conducting remediation efforts to remove the contamination from the aquifer. WTA claims that Trimet should reimburse it for: the construction costs of a new well (approximately $250,000); $650,000 in water supply replacement costs over and above reimbursements already made; and approximately $250,000 for professional services. Based upon information available at this time, it is not possible to determine Trimet's potential liability for these claims. OTHER MATTERS The Corporation, Mr. Kennedy, Mr. Bentele, and two former officers no longer with the Corporation are named as defendants in two purported class actions brought in February 1992 by two alleged stockholders. These actions, which have been consolidated and are now pending in the United States District Court for the Southern District of New York, allege violations of federal securities laws and related state laws. The plaintiffs base their allegations principally on the Corporation's February 18, 1992, press release about an FDA inspection of Mallinckrodt Veterinary's Kansas City plant that also cautioned that estimates of 21 security analysts regarding fiscal 1992 earnings from continuing operations in excess of $1.65 per share "were probably too optimistic." The estimates had been marginally higher, $1.67 per share. The thrust of the allegations is that disclosure of manufacturing deficiencies was not made on a timely basis. On October 4, 1993, the district court granted defendants' motion to dismiss the complaint without leave to replead. Plaintiffs thereafter moved to reopen the judgment and for leave to file an amended pleading, which motion was denied. Plaintiffs have appealed both decisions and the appeal has been briefed and is awaiting argument. In September 1992, a stockholder's derivative suit was filed in the United States District Court for the Southern District of New York, purportedly on behalf of the Corporation, against all of the then directors of the Corporation asserting claims for alleged violation of the federal proxy rules, for alleged breach of fiduciary duty, and in Mr. Kennedy's case for alleged misappropriation of confidential business information. The case was assigned to the same judge as the above class actions and was consolidated with them for pre-trial purposes. This case, like the class actions, arose as a consequence of the FDA inspection and the February 18, 1992 press release referred to above in the class actions. On October 4, 1993, the district court granted defendants' motion to dismiss the complaint for, among other things, failure to make a demand on the Board before commencing suit. Plaintiff did not appeal this decision. Rather, plaintiff's counsel served a purported demand letter on the Board requesting that appropriate action be taken to redress the alleged misconduct that was the subject of plaintiff's prior complaint. By letter dated December 7, 1993, the Corporation requested further information from plaintiff regarding the allegations in the demand letter, but to date has not received any response to this request. The Corporation believes the aforementioned suits are without merit and will have no material adverse effect on its financial position or results of operations. Other previously reported legal proceedings have been settled or the issues sufficiently resolved so as to not merit further reporting. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended June 30, 1994. 22 EXECUTIVE OFFICERS OF THE REGISTRANT The ages and five-year employment histories of Mallinckrodt's executive officers at June 30, 1994, were as follows: C. R. (RAY) HOLMAN Age 51. President and Chief Executive Officer since December 1992; Vice President from October 1990 to December 1992; President and Chief Executive Officer, Mallinckrodt Medical, Inc., from January 1989 until December 1992; Group Vice President of the Medical Products Group, Mallinckrodt Inc., from September 1985 to January 1989. WILLIAM J. MERCER Age 46. Senior Vice President since October 1993; Vice President from December 1992 to October 1993; President and Chief Executive Officer of Mallinckrodt Veterinary, Inc. since December 1992; Senior Vice President and Group Executive of Mallinckrodt Medical, Inc. from March 1992 to December 1992; Group Vice President, Medical Imaging, from November 1988 to March 1992. (Mr. Mercer resigned his positions as Senior Vice President of Mallinckrodt and President and Chief Executive Officer of Mallinckrodt Veterinary, Inc. effective July 20, 1994). ROBERT G. MOUSSA Age 47. Senior Vice President since October 1993; Vice President from December 1992 to October 1993; President and Chief Executive Officer of Mallinckrodt Medical, Inc., since December 1992; Senior Vice President and Group Executive, Mallinckrodt Medical, Inc., from September 1992 to December 1992; Group Vice President, International, Mallinckrodt Medical, Inc., from January 1989 to September 1992. MACK G. NICHOLS Age 56. Senior Vice President since October 1993; Vice President from October 1990 to October 1993; President and Chief Executive Officer of Mallinckrodt Chemical, Inc. since January 1989. MICHAEL A. ROCCA Age 49. Senior Vice President, Chief Financial Officer, and Treasurer since April 1994; Corporate Vice President and Treasurer of Honeywell Inc. from March 1992 to April 1994; Vice President, Finance, for Honeywell Europe from 1990 to 1992; Vice President and Controller of Honeywell Inc. International Group from 1987 to 1990. 23 BARBARA A. ABBETT Age 54. Vice President, Communications since April 1994; Vice President and Senior Partner with Fleishman-Hillard, Inc., from 1979 to April 1994. ASHOK CHAWLA Age 45. Vice President, Strategic Management since July 1991; Vice President Strategic Planning and Business Development of Mallinckrodt Veterinary, Inc., from August 1990 to July 1991; Division Director, Finance and Administration for Mallinckrodt, Inc. - Europe from August 1988 to August 1990. BEVERLEY L. HAYES Age 55. Vice President, Organization and Human Resources since November 1990; Senior Vice President, Human Resources of Mallinckrodt Veterinary, Inc., from September 1990 to November 1990; Vice President Human Resources of Mallinckrodt Veterinary, Inc., from July 1989 to September 1990. ROGER A. KELLER Age 49. Vice President, Secretary, and General Counsel since July 1993; Senior Vice President and General Counsel, Mallinckrodt Medical, Inc., from March 1992 to July 1993; Vice President and General Counsel of Mallinckrodt Medical, Inc., from September 1989 to March 1992; Vice President and Secretary, Mallinckrodt, Inc., since August 1986. DOUGLAS K. LARSEN Age 55. Vice President, Environment and Safety since October 1991; Corporate Staff Vice President, Environment and Safety from September 1988 to October 1991. (Mr. Larsen's employment by the Company ended June 30, 1994). WILLIAM B. STONE Age 51. Vice President and Controller since November 1990; Assistant Controller and Corporate Staff Vice President from October 1989 to November 1990; Vice President of Mallinckrodt, Inc., since April 1983. MISCELLANEOUS All of the Company's officers are elected annually, with the terms of the officers listed above to expire in October 1994, except as otherwise noted. No "family relationships," as that term is defined, exist among any of the listed officers. 24 George D. Kennedy, Chairman of the Board, is technically an officer of the Company, but as a retired employee and consultant, has no full-time obligations and hence is not regarded as or believed to be an Executive Officer. As a director, his business experience and directorships are described in the Company's definitive Proxy Statement for the Annual Meeting of Stockholders to be held October 19, 1994. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS COMMON STOCK PRICES AND DIVIDENDS
Quarter First Second Third Fourth - ---------------------------------------------------------------------------- Fiscal 1994 Dividends per common share $.11 $.125 $.125 $.125 Common stock prices High 33.38 36.63 38.50 34.50 Low 28.13 32.25 30.13 28.50 - ---------------------------------------------------------------------------- Fiscal 1993 Dividends per common share $.10 $.11 $.11 $.11 Common stock prices High 37.75 40.25 40.25 31.63 Low 31.25 31.25 23.00 23.38 - ----------------------------------------------------------------------------
The principal market on which Mallinckrodt's common stock is traded is the New York Stock Exchange. Common stock prices are from the composite tape for New York Stock Exchange issues as reported in THE WALL STREET JOURNAL. As of August 31, 1994, the number of registered holders of common stock, as reported by the Company's registrar, was 10,091. 25 ITEM 6.
SELECTED FINANCIAL DATA (Dollars in millions except per share amounts) Years ended June 30, 1994(1) 1993(1) 1992(1) 1991(2) 1990(3) 1989(4) - --------------------------------------------------------------------------------------------------------------------------------- Net sales $1,940.1 $1,796.3 $1,702.9 $1,633.9 $1,424.6 $ 982.9 - --------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations $ 107.4 $ (113.8) $ 128.8 $ 97.2 $ 55.3 $ 53.4 - --------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from discontinued operations (5) (3.6) (6.0) (1.3) (9.0) 1.2 63.6 - --------------------------------------------------------------------------------------------------------------------------------- Cumulative effects of accounting changes (80.6) - --------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) 103.8 (200.4) 127.5 88.2 56.5 117.0 - --------------------------------------------------------------------------------------------------------------------------------- Preferred stock dividends (.4) (.4) (.4) (.4) (4.2) (14.4) - --------------------------------------------------------------------------------------------------------------------------------- Available for common shareholders $ 103.4 $ (200.8) $ 127.1 $ 87.8 $ 52.3 $ 102.6 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Per Common Share Data (6) - --------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations $ 1.38 $ (1.48) $ 1.65 $ 1.37 $ .79 $.57 - --------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) 1.33 (2.60) 1.63 1.24 .81 1.50 - --------------------------------------------------------------------------------------------------------------------------------- Dividends declared .49 .43 .38 .33 .33 .33 - --------------------------------------------------------------------------------------------------------------------------------- Book value 13.05 11.77 16.02 14.42 11.97 11.23 - --------------------------------------------------------------------------------------------------------------------------------- Average common shares (in millions) 77.6 77.4 77.8 70.6 65.0 68.4 - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
(Dollars in millions) - --------------------------------------------------------------------------------------------------------------------------------- Total assets $2,433.5 $2,177.6 $2,050.8 $2,250.2 $2,130.9 $1,971.6 - --------------------------------------------------------------------------------------------------------------------------------- Working capital 261.3 203.7 351.6 409.0 311.1 594.6 - --------------------------------------------------------------------------------------------------------------------------------- Current ratio 1.4:1 1.3:1 1.8:1 1.6:1 1.8:1 3.3:1 - --------------------------------------------------------------------------------------------------------------------------------- Total debt $ 669.8 $ 617.0 $ 373.7 $ 643.4 $ 837.4 $ 773.7 - --------------------------------------------------------------------------------------------------------------------------------- Net deferred income tax (assets) liabilities (40.9) (36.0) 41.7 48.0 52.9 42.8 - --------------------------------------------------------------------------------------------------------------------------------- Shareholders' equity 1,015.9 910.5 1,224.2 1,084.2 824.8 888.2 - --------------------------------------------------------------------------------------------------------------------------------- Invested capital 1,644.8 1,491.5 1,639.6 1,775.6 1,715.1 1,704.7 - --------------------------------------------------------------------------------------------------------------------------------- Total debt/invested capital 41% 41% 23% 36% 49% 45% - --------------------------------------------------------------------------------------------------------------------------------- Capital expenditures $ 172.3 $ 188.3 $ 150.4 $ 123.4 $ 85.7 $ 82.2 - --------------------------------------------------------------------------------------------------------------------------------- Total dividends declared 37.7 33.2 29.5 23.7 25.8 36.9 - --------------------------------------------------------------------------------------------------------------------------------- Common shares outstanding (in millions) 77.0 76.4 75.7 75.2 68.1 60.7 - --------------------------------------------------------------------------------------------------------------------------------- Number of employees 10,200 10,000 9,500 9,800 9,600 6,900 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- (1)See "Mallinckrodt Management's Discussion and Analysis" for a description of nonrecurring items. (2)Results for 1991 included an after-tax gain of $2.0 million, or $.08 per share, from the sale of intangibles at Mallinckrodt Veterinary. (3)Results for 1990 included favorable adjustments from the conclusion of income tax audits that amounted to $14.8 million, $11.9 million after taxes, or $.18 per share, from lower income taxes and higher interest income. That benefit was partially offset by restructuring charges of $4.9 million, $3.0 million after taxes, or $.05 per share, and charges for compensation plans tied to the price of the Company's common stock that amounted to $3.9 million, $2.4 million after taxes, or $.04 per share. (4)Results for 1989 included favorable adjustments from the conclusion of income tax audits that amounted to $20.8 million, $16.6 million after taxes, or $.24 per share, from lower income taxes and related interest charges. Such earnings also included a gain of $3.9 million, $2.4 million after taxes, or $.03 per share, from the sale of a business. (5)See Note 1 of Notes to Consolidated Financial Statements for information on discontinued operations in 1994, 1993 and 1992. The results for 1991 included nonrecurring after-tax charges of $2.8 million, or $.04 per share, from net effects related to the IFL stock sales. The results for 1990 and 1989 included nonrecurring after-tax gains of $5.2 million, or $.08 per share, and $21.5 million, or $.30 per share, from the sale of the fragrance business and the IFL public offering, respectively. Results for discontinued operations for 1991, 1990 and 1989 also included after-tax charges of $6.2 million, or $.09 per share; $7.6 million, or $.12 per share; and $1.7 million, or $.02 per share, respectively, for environmental and litigation costs related to operations previously sold. (6)Presented on a primary per common share basis adjusted for the 3-for- 1 stock split in November 1991.
26 ITEM 7. MALLINCKRODT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESUILTS OF OPERATIONS. [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- OVERVIEW ALL REFERENCES TO YEARS ARE TO FISCAL YEARS ENDED JUNE 30 UNLESS OTHERWISE STATED. 1994 VS. 1993 Before restructuring charges Mallinckrodt's earnings from continuing operations were $166 million, or $2.14 per share. Comparable prior year earnings from continuing operations were $128 million, or $1.65 per share. Excluding favorable current year tax adjustments totaling $3 million, or $.04 per share, from recently enacted tax law changes and a 1993 non-recurring corporate expense charge of $3 million after taxes, or $.04 per share, 1994 results were 24 percent higher than a year ago. Net earnings for 1994 were $104 million, or $1.33 per share, compared with a net loss of $200 million, or $2.60 per share, in 1993. Included in these results were after-tax restructuring charges totaling $59 million, or $.76 per share, and $242 million, or $3.13 per share, for 1994 and 1993, respectively. The loss in 1993 also included a non-cash cumulative charge of $81 million, or $1.04 per share, for adoption of new standards of accounting for income taxes and certain postretirement/postemployment benefits. Net sales for 1994 were $1,940 million, compared with $1,796 million a year earlier. This 8 percent increase was achieved despite unfavorable currency translation effects, slower volume growth and pricing pressures. Each of Mallinckrodt's three businesses reported improved operating results for the year. Operating earnings before the restructuring charges were $287 million in 1994, compared with $225 million in the previous year. Excluding the 1993 non- recurring corporate expense charge, operating earnings were up 24 percent. Restructuring charges are discussed in the business sections which follow, and in Note 1 of Notes to Consolidated Financial Statements (Notes). Charges for discontinued operations are discussed in Note 1 of the Notes. 1993 VS. 1992 Mallinckrodt's 1993 results from continuing operations, before restructuring charges, were $128 million, or $1.65 per share, which included a net, non-cash charge of $4 million after taxes, or $.05 per share, associated with adoption of new accounting standards. These results compared with 1992 earnings from continuing operations of $129 million, also $1.65 per share. The net loss for 1993 was $200 million, or $2.60 per share. Included in this loss were after-tax restructuring charges totaling $242 million, or $3.13 per share; a non-cash cumulative charge of $81 million, or $1.04 per share, for adoption of new standards of accounting for income taxes and certain postretirement and postemployment benefits, retroactive to July 1, 1992; and after-tax charges related to discontinued operations of $6 million, or $.08 per share. 27 Net sales increased 5 percent while operating earnings, excluding restructuring charges, were about flat with 1992 after absorbing incremental pre-tax charges of $8 million for adoption of new accounting standards for employee benefits. Mallinckrodt Medical's 26 percent increase in sales and 36 percent rise in operating earnings were offset by decreases in Mallinckrodt Chemical and Mallinckrodt Veterinary. Restructuring charges are discussed in the Mallinckrodt Chemical and Mallinckrodt Veterinary sections which follow, and in Note 1 of the Notes. Notes 1, 8 and 13 of the Notes contain further discussion of accounting changes. Charges for discontinued operations are discussed in Note 1 of the Notes.
- ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- MALLINCKRODT CHEMICAL (In millions) Years Ended June 30, 1994 1993 1992(1) - ----------------------------------------------------------------------------------- Net sales: - ----------------------------------------------------------------------------------- Ongoing operations: - ----------------------------------------------------------------------------------- Pharmaceutical Specialties $225 $212 $183 - ----------------------------------------------------------------------------------- Catalysts, Performance & Lab Chemicals 212 183 185 - ----------------------------------------------------------------------------------- 437 395 368 - ----------------------------------------------------------------------------------- Divested operations and flavors business(2) 73 - ----------------------------------------------------------------------------------- $437 $395 $441 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Operating earnings (loss): Ongoing operations $ 62 $ 46 $ 47 - ----------------------------------------------------------------------------------- Restructuring charge (51) - ----------------------------------------------------------------------------------- Divested operations and flavors business(2) 13 - ----------------------------------------------------------------------------------- 62 (5) 60 - ----------------------------------------------------------------------------------- Pre-tax equity in joint venture 18 10 1 - ----------------------------------------------------------------------------------- Earnings $ 80 $ 5 $ 61 - ----------------------------------------------------------------------------------- Ongoing operating earnings as a percent of ongoing sales 14.1% 11.6% 12.6% - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- (1)Restated to reflect the company's reorganization effective July 1, 1992. (2)Includes the divestiture of the cosmetic and electronic chemicals businesses and pre-joint venture operating results of the flavors business.
- ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- 1994 VS. 1993 Mallinckrodt Chemical's operating earnings of $62 million and an $18 million pre-tax equity-investment share of earnings from its Tastemaker flavors joint venture totaled $80 million. Excluding the 1993 restructuring charge, this represented a 42 percent earnings improvement over last year. Net sales increased 11 percent to $437 million. The 1993 restructuring program is producing anticipated results with the exit of the aromatic flourine intermediates business substantially completed in 1994 and the exit of the photochemicals business expected to be substantially completed in 1995. Catalysts, performance and lab chemicals sales increased 15 percent, principally from higher sales volume in catalysts and performance chemicals. Improved plant operations in performance chemicals and favorable comparisons in restructured businesses also contributed to higher operating earnings in 1994. Management expects the 1994 acquisition of Catalyst Resources, Inc., a manufacturer of polymerization catalysts, to contribute to future results. 28 Pharmaceutical specialties sales increased 6 percent. Contributing significantly to improved operating results were higher worldwide medicinal narcotics sales primarily due to increased sales volume and improved medicinal narcotics plant operations. Results for 1994 were negatively affected by a scheduled Raleigh, North Carolina, plant maintenance shutdown in the first quarter, additional investment in the peptides business and flat acetaminophen (APAP) worldwide sales compared with 1993. The Tastemaker flavors joint venture made a significant contribution to the 1994 results with a 75 percent increase in earnings due to strong worldwide growth and efficiencies from manufacturing consolidation programs completed in 1993. 1993 VS. 1992 Mallinckrodt Chemical's operating loss of $5 million included a pre-tax restructuring charge of $51 million, primarily to exit the company's aromatic fluorine intermediates (AFI) and photochemicals businesses. Excluding the restructuring charge, Mallinckrodt Chemical's operating earnings, plus its equity in the flavors joint venture, decreased $5 million from 1992. Year-to-year performance comparisons were negatively influenced by additional 1993 expenses of $3 million from accounting changes for employee benefits, and, in 1992's second half, the formation of a flavors joint venture and the divestiture of non-strategic businesses. After adjusting for these events, 1993 ongoing operating earnings improved 5 percent on a corresponding net sales increase of 7 percent. Catalysts, performance and lab chemicals ongoing sales were one percent below 1992 principally because of lower AFI sales volumes and recessionary conditions that plagued the business throughout most of 1993. Higher sales from the new lab chemical product disposal service favorably impacted results. The AFI and photochemicals businesses, which are to be exited, detracted from 1993 earnings. Pharmaceutical specialties ongoing sales improved 16 percent. Higher sales volumes for APAP and medicinal narcotics, and to a much lesser extent January price increases, contributed significantly to the improved ongoing results. The company's continued investment in its recently started peptides business reduced overall 1993 performance. The Tastemaker flavors joint venture earnings continued significant positive momentum. Sales for the venture were nearly $200 million in its first year ended December 31, 1992. Additional costs relating to rationalization of its major production facilities in the U.S. negatively affected earnings in the first half of 1993. Tastemaker's performance improved in the last six months of the fiscal year to exceed expectations for 1993.
- ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- MALLINCKRODT MEDICAL (In millions) Years Ended June 30, 1994 1993 1992(1) - ----------------------------------------------------------------------------------- Net sales: - ----------------------------------------------------------------------------------- Radiology & Cardiology $436 $382 $294 - ----------------------------------------------------------------------------------- Nuclear Medicine 186 182 160 - ----------------------------------------------------------------------------------- Anesthesiology & Critical Care 290 219 166 - ----------------------------------------------------------------------------------- $912 $783 $620 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Operating earnings: - ----------------------------------------------------------------------------------- Ongoing operations $203 $174 $128 - ----------------------------------------------------------------------------------- Restructuring charge (74) - ----------------------------------------------------------------------------------- $129 $174 $128 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Ongoing operating earnings as a percent of sales 22.2% 22.3% 20.6% - ----------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- 29 1994 VS. 1993 Mallinckrodt Medical's net sales were $912 million and operating earnings before a restructuring charge were $203 million, both up 16 percent from 1993. The 1994 pre-tax restructuring charge of $74 million resulted from fourth quarter decisions made pursuant to efforts conducted during the year to develop strategies to effectively respond to customer needs and compete in a market that is changing rapidly as the result of health care reform. The key components of the charge were reorganization of the current medical specialty oriented U.S. sales structure into a unified sales organization divided into geographical districts; reorganization to reduce, centralize and standardize certain non- sales related functions and management processes; relocation of the Argyle, New York, tracheostomy tube manufacturing operations to existing plants in Athlone, Ireland, and Irvine, California, and a new facility to be built in Juarez, Mexico; and severance costs related to an associated work-force reduction of approximately 500 employees at various locations around the world. Restructuring actions related to the program are in process and are expected to be substantially complete in one year. Pre-tax cash expenditures should approximate $65 million of which about $50 million will occur in 1995. After-tax cash costs of the program will be about $74 million, consisting of the above cash costs and an additional $34 million of capital spending that will be incurred relating to information systems and manufacturing rationalization. Annual pre-tax savings from the restructuring will be approximately $40 million, with partial benefit in fiscal 1995 and most of the savings achieved in 1996. Radiology and cardiology sales increased 14 percent. Higher Optiray sales volume in the U.S., Japan and Europe and increased catheter sales volume were the primary contributors to the improvement. The earnings effect of the higher sales was partially offset by higher standard product costs associated with the new Ireland Ioversol production facility and pricing pressures related to Optiray. The Optiray production capacity expansions underway last year were essentially complete by year end. Management received approval of Albunex, its ultrasound contrast agent in August 1994, with product launch anticipated soon. Nuclear medicine sales showed an increase of 2 percent. Higher sales volume in the U.S. and Europe associated with thallium and TechneScan MAG3 were partially offset by unfavorable foreign exchange rates and price pressures. In June 1994, OctreoScan, a radiopharmaceutical used to aid diagnosis of certain cancer tumors, received FDA approval. This and other new products are expected to help improve sales growth. Strong results for the anesthesiology and critical care business were a significant factor in the overall year-to-year comparison. Sales increased 32 percent. Newly acquired businesses and improved U.S. sales associated with HemoCue as a result of hemoglobin products receiving waiver status contributed to the improvement. Operating earnings increases were partially offset by unfavorable year-to-year foreign currency effects and amortization of intangibles related to acquisitions. 1993 VS. 1992 Mallinckrodt Medical's strong performance continued through 1993. Net sales increased 26 percent and operating earnings rose 36 percent, after absorbing $4 million in additional pre-tax charges related to changes in accounting for employee benefits. Results were balanced as all segments of the business, led by radiology, contributed to the improvement. The excellent performance of the radiology and cardiology business continued as sales were up 30 percent. Strong sales volume for the x-ray contrast medium Optiray in North America and Europe, and product introduction in Japan, which was begun in late 1992, were the main contributors. Nuclear medicine sales increased 14 percent. Higher sales of thallium in the U.S. and Europe associated with double injection procedures and pharmacological stress tests favorably impacted results. The rate of increase over 1992 for thallium sales moderated in the second half of 1993. Higher TechneScan MAG3 and UltraTag RBC agent kit sales and continued growth of OctreoScan sales in Europe contributed to the improved results. Anesthesiology and critical care sales improved 32 percent. Higher airway management product sales, the full year impact of the WarmTouch product line sales, higher sales associated with the GEM family of blood gas and electrolyte analyzers, and acquired businesses were all factors in increased results.
- ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- MALLINCKRODT VETERINARY (In millions) Years Ended June 30, 1994 1993 1992 - ----------------------------------------------------------------------------------- Net sales: - ----------------------------------------------------------------------------------- Pharmaceuticals $249 $258 $285 - ----------------------------------------------------------------------------------- Biologicals 95 105 104 - ----------------------------------------------------------------------------------- Feed Ingredients 162 169 172 - ----------------------------------------------------------------------------------- Veterinary Specialties & Other 86 86 81 - ----------------------------------------------------------------------------------- $592 $618 $642 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Operating earnings (loss): - ----------------------------------------------------------------------------------- Ongoing operations $ 53 $ 40 $ 69 - ----------------------------------------------------------------------------------- Restructuring charges (20) (283) - ----------------------------------------------------------------------------------- $ 33 $(243) $ 69 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Ongoing operating earnings as a percent of sales 8.9% 6.5% 10.8% - ----------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------
30 - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- 1994 VS. 1993 Mallinckrodt Veterinary's operating earnings of $33 million included a pre-tax restructuring charge of $20 million to adjust a prior year provision associated with the decision to discontinue development of porcine somatotropin (PST) in May 1993. This adjustment effectively removes all remaining PST valuation risk. Excluding restructuring charges in both years, Mallinckrodt Veterinary's operating earnings increased 31 percent compared to the previous year on a sales decline of 4 percent. Improved operating earnings resulted from actions related to the restructuring program begun last year, which included various cost control measures, plant closures and a workforce reduction of approximately 1,000 employees resulting in severance costs of $25 million. Lower sales resulted primarily from global product rationalization programs designed to eliminate low margin products and from unfavorable currency translation effects. Pharmaceutical sales for the year decreased 3 percent primarily from product rationalization programs in Australia and New Zealand and unfavorable currency translation. Strong sales of parasiticides in Europe, higher sales volumes in Brazil resulting from expanded distribution rights, and increased sales of growth promotants in North America partially offset the sales decrease. Biological sales were down 10 percent for the year, principally from supply and production problems, unfavorable currency translation effects, product rationalization programs and lower volumes of companion animal vaccine sales in North America, partially offset by higher foot and mouth disease vaccine sales in Brazil. Feed ingredients sales declined 4 percent from the previous year due to continuing price deterioration on lower U.S. sales volume. Veterinary specialities sales were up slightly compared to last year, primarily from increased sales volumes in Latin America. Lower sales volumes of a divested business in North America and unfavorable currency translation negatively impacted 1994 sales. 1993 VS. 1992 Mallinckrodt Veterinary's operating loss of $243 million included a pre-tax restructuring charge of $283 million related to actions taken as a result of its unsatisfactory performance. The major components of the charge were the decision to discontinue development of Mallinckrodt Veterinary's Grolene brand of porcine somatotropin, including manufacturing and support facilities; closure and consolidation of manufacturing plants and other distribution and support facilities; redefinition and reorganization of research and development, commercial and administrative functions; exit from certain animal health businesses; and severance costs related to a substantial work-force reduction. Excluding the restructuring charge, Mallinckrodt Veterinary's operating earnings declined to $40 million on a net sales decrease of 4 percent, mainly due to higher manufacturing costs, delayed restart of certain plant operations, lower North American sales volumes and European recessionary conditions. Continuing price pressures and lower volumes in feed ingredients and $2 million in expenses from accounting changes for employee benefits were also negatives. Sales of pharmaceutical products decreased by 9 percent principally because of lower animal productivity, antimicrobial and parasiticide volumes. Timing of prior year marketing and sales programs and shutdown of pharmaceutical manufacturing in Kansas City, Kansas, were key contributors to the lower sales. Biological sales were up slightly due to favorable pricing in Brazil which was almost offset by competitive pricing pressures in North America. Veterinary specialties sales improved 6 percent from increases across a broad range of these products. 31 CORPORATE MATTERS Corporate expense decreased $5 million to $30 million in 1994, after increasing $5 million in 1993. These changes related primarily to the 1993 pre-tax charges of $6 million for executive resignations resulting from the performance of Mallinckrodt Veterinary. Interest and other nonoperating income (expense), net declined $3 million in 1994 from 1993. This decrease related primarily to the write-down of an investment, higher bank charges and lower interest income. Interest expense increased $2 million in 1994 from higher borrowings and increased interest rates. Mallinckrodt's reported effective tax rate for continuing operations was 37.3 percent in 1994. Excluding the impact of restructuring charges and statutory rate changes, that rate was 38.5 percent, compared with 36.8 percent in 1993. See Note 8 of the Notes for further discussion of income taxes. FINANCIAL CONDITION Mallinckrodt's financial resources are expected to continue to be adequate to support existing businesses, fund the remaining cash expenditures of approximately $130 million for the Company's restructuring programs and fund new opportunities. Since June 30, 1993, cash and cash equivalents increased $37 million. Operations provided $227 million of cash, while acquisition and capital spending totaled $268 million, $61 million of which related to the acquisition of Catalyst Resources, Inc. and $28 million related to the acquisition of DAR S.p.A. In July 1993, the Company received $52 million in cash for its dividend receivable from IMC Fertilizer Group, Inc. The Company's current ratio at June 30, 1994, was 1.4:1. Total debt as a percentage of invested capital was 41 percent. In August 1987 and October 1988, the Company's Board of Directors authorized repurchase of a total of 42 million shares of its common stock. Since then 29 million shares have been purchased under this authorization, of which none were purchased during the year ended June 30, 1994. On April 8, 1992, a shelf registration statement was filed with the SEC for $250 million of debt securities. In 1994, the Company offered $100 million of 6% Notes due October 15, 2003, and $100 million of 7% Debentures due December 15, 2013, from this shelf registration. Net proceeds from these offerings totaled $198 million, of which $90 million was used to replace short-term notes related to 1993 acquisitions. Such notes had been classified as long-term debt at June 30, 1993. The Company has a $350 million private-placement commercial paper program. This program is backed by $450 million of U.S. lines of credit, of which $350 million is available until August 1996 and $100 million is up for renewal in August 1994. At June 30, 1994, commercial paper borrowings and borrowings under the U.S. credit line amounted to $172 million and $10 million, respectively. At June 30, 1994, non-U.S. lines of credit totaling $218 million were also available and borrowings under these lines amounted to $45 million. The non-U.S. lines are cancellable at any time. Estimated capital spending for the fiscal year ending June 30, 1995, is approximately $260 million. OTHER MATTERS The Company does not consider the present rate of inflation to have a significant impact on the businesses in which it operates except for the hyperinflationary effects on the Latin American businesses of Mallinckrodt Veterinary which are discussed in Note 16 of the Notes. See Note 19 of the Notes for a discussion of environmental matters. - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- [GRAPHIC] - ------------------------------------------------------------------------------- 32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 34 Information by Business Segment. . . . . . . . . . . . . . . . . . . . . . 35 Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . 36 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . 37 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . 38 Consolidated Statement of Changes in Shareholders' Equity. . . . . . . . . 39 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 40 Quarterly Results (Unaudited). . . . . . . . . . . . . . . . . . . . . . . 50 33 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Mallinckrodt Group Inc. We have audited the accompanying consolidated balance sheet of Mallinckrodt Group Inc. as of June 30, 1994 and 1993, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended June 30, 1994, appearing on pages 35 through 50. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mallinckrodt Group Inc. at June 30, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Notes 8 and 13 to the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes and employee benefits. /s/ Ernst & Young LLP Ernst & Young LLP St. Louis, Missouri August 9, 1994 34 - - INFORMATION BY BUSINESS SEGMENT NET SALES
(In millions) 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Chemical $ 436.9 $ 395.3 $ 440.9 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Medical 912.3 783.1 620.3 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Veterinary 591.7 618.1 641.8 - ------------------------------------------------------------------------------------------------------------------------ Intersegment sales (.8) (.2) (.1) - ------------------------------------------------------------------------------------------------------------------------ Consolidated $1,940.1 $1,796.3 $1,702.9 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
EARNINGS AND ASSETS
Earnings (Loss) from Continuing Operations Before Income Taxes Identifiable Assets ----------------------------------- ---------------------------------- (In millions) 1994 1993 1992 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Chemical $ 61.7 $ (5.4) $ 59.7 $ 574.9 $ 460.8 $ 486.8 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Medical 128.9 174.4 127.8 1,102.5 888.6 634.0 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Veterinary 32.6 (242.5) 69.0 660.0 698.0 778.9 - ------------------------------------------------------------------------------------------------------------------------ Corporate (30.2) (35.5) (30.5) 96.9 132.8 151.8 - ------------------------------------------------------------------------------------------------------------------------ Eliminations .1 (.5) (.8) (2.6) (.7) - ------------------------------------------------------------------------------------------------------------------------ Operating earnings (loss) 193.1 (109.0) 225.5 - ------------------------------------------------------------------------------------------------------------------------ Equity in pre-tax earnings of joint venture 18.5 10.6 1.6 - ------------------------------------------------------------------------------------------------------------------------ Interest and other nonoperating income (expense), net (.4) 2.6 15.3 - ------------------------------------------------------------------------------------------------------------------------ Interest expense (39.8) (37.3) (39.6) - ------------------------------------------------------------------------------------------------------------------------ Consolidated $171.4 $(133.1) $202.8 $2,433.5 $2,177.6 $2,050.8 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Capital Expenditures Depreciation and Amortization ---------------------------------- ---------------------------------- (In millions) 1994 1993 1992 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Chemical $ 41.6 $ 46.2 $ 35.9 $ 26.4 $ 28.0 $ 29.2 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Medical 99.4 95.0 44.4 47.8 37.1 27.2 - ------------------------------------------------------------------------------------------------------------------------ Mallinckrodt Veterinary 28.1 45.9 54.1 27.9 28.8 30.5 - ------------------------------------------------------------------------------------------------------------------------ Corporate 3.2 1.2 16.0 2.5 2.2 2.4 - ------------------------------------------------------------------------------------------------------------------------ Consolidated $172.3 $ 188.3 $150.4 $ 104.6 $ 96.1 $ 89.3 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
(See Note 17 of the Notes to Consolidated Financial Statements) 35 - - CONSOLIDATED STATEMENT OF OPERATIONS
(In millions except per share amounts) Years ended June 30, 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Net sales $1,940.1 $1,796.3 $1,702.9 - ------------------------------------------------------------------------------------------------------------------------ Operating costs and expenses: - ------------------------------------------------------------------------------------------------------------------------ Cost of goods sold 1,037.3 970.6 915.6 - ------------------------------------------------------------------------------------------------------------------------ Selling, administrative and general expenses 522.0 511.2 480.3 - ------------------------------------------------------------------------------------------------------------------------ Research and development expenses 95.3 95.3 90.5 - ------------------------------------------------------------------------------------------------------------------------ Restructuring charge 93.9 334.1 - ------------------------------------------------------------------------------------------------------------------------ Other operating income, net (1.5) (5.9) (9.0) - ------------------------------------------------------------------------------------------------------------------------ Total operating costs and expenses 1,747.0 1,905.3 1,477.4 - ------------------------------------------------------------------------------------------------------------------------ Operating earnings (loss) 193.1 (109.0) 225.5 - ------------------------------------------------------------------------------------------------------------------------ Equity in pre-tax earnings of joint venture 18.5 10.6 1.6 - ------------------------------------------------------------------------------------------------------------------------ Interest and other nonoperating income (expense), net (.4) 2.6 15.3 - ------------------------------------------------------------------------------------------------------------------------ Interest expense (39.8) (37.3) (39.6) - ------------------------------------------------------------------------------------------------------------------------ Earnings (loss) from continuing operations before income taxes 171.4 (133.1) 202.8 Income tax provision (benefit) 64.0 (19.3) 74.0 - ------------------------------------------------------------------------------------------------------------------------ Earnings (loss) from continuing operations 107.4 (113.8) 128.8 - ------------------------------------------------------------------------------------------------------------------------ Loss from discontinued operations (3.6) (6.0) (1.3) - ------------------------------------------------------------------------------------------------------------------------ Earnings (loss) before cumulative effect of accounting changes 103.8 (119.8) 127.5 - ------------------------------------------------------------------------------------------------------------------------ Cumulative effect of accounting changes (80.6) - ------------------------------------------------------------------------------------------------------------------------ Net earnings (loss) 103.8 (200.4) 127.5 - ------------------------------------------------------------------------------------------------------------------------ Preferred stock dividends (.4) (.4) (.4) - ------------------------------------------------------------------------------------------------------------------------ Available for common shareholders $ 103.4 $ (200.8) $ 127.1 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ EARNINGS (LOSS) PER COMMON SHARE Continuing operations $ 1.38 $ (1.48) $ 1.65 - ------------------------------------------------------------------------------------------------------------------------ Discontinued operations (.05) (.08) (.02) - ------------------------------------------------------------------------------------------------------------------------ Earnings (loss) before cumulative effect of accounting changes 1.33 (1.56) 1.63 - ------------------------------------------------------------------------------------------------------------------------ Cumulative effect of accounting changes (1.04) - ------------------------------------------------------------------------------------------------------------------------ Net earnings (loss) $ 1.33 $ (2.60) $ 1.63 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
(The accompanying Notes are an integral part of the Consolidated Financial Statements.) 36 - - CONSOLIDATED BALANCE SHEET ASSETS
(In millions) At June 30, 1994 1993 - ------------------------------------------------------------------------------------------------------------------------ Current assets: - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents $ 87.9 $ 51.3 - ------------------------------------------------------------------------------------------------------------------------ Trade receivables, less allowances of $11.1 in 1994 and $13.4 in 1993 343.6 319.4 - ------------------------------------------------------------------------------------------------------------------------ IFL dividend receivable 51.9 - ------------------------------------------------------------------------------------------------------------------------ Inventories 376.9 353.4 - ------------------------------------------------------------------------------------------------------------------------ Deferred income taxes 77.6 21.3 - ------------------------------------------------------------------------------------------------------------------------ Other current assets 46.0 39.2 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 932.0 836.5 - ------------------------------------------------------------------------------------------------------------------------ Investments and long-term receivables, less allowances of $13.1 in 1994 and $12.5 in 1993 147.0 132.6 - ------------------------------------------------------------------------------------------------------------------------ Property, plant and equipment 1,396.0 1,192.9 - ------------------------------------------------------------------------------------------------------------------------ Accumulated depreciation (532.8) (494.0) - ------------------------------------------------------------------------------------------------------------------------ Property, plant and equipment, net 863.2 698.9 - ------------------------------------------------------------------------------------------------------------------------ Intangible assets 489.3 466.9 - ------------------------------------------------------------------------------------------------------------------------ Deferred income taxes 2.0 42.7 - ------------------------------------------------------------------------------------------------------------------------ Total assets $2,433.5 $2,177.6 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY (In millions except share and per share amounts) - ------------------------------------------------------------------------------------------------------------------------ Current liabilities: - ------------------------------------------------------------------------------------------------------------------------ Short-term debt $ 147.8 $ 189.4 - ------------------------------------------------------------------------------------------------------------------------ Accounts payable 139.4 117.6 - ------------------------------------------------------------------------------------------------------------------------ Accrued liabilities 356.0 311.9 - ------------------------------------------------------------------------------------------------------------------------ Income taxes payable 25.4 11.4 - ------------------------------------------------------------------------------------------------------------------------ Deferred income taxes 2.1 2.5 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 670.7 632.8 - ------------------------------------------------------------------------------------------------------------------------ Long-term debt, less current maturities 522.0 427.6 - ------------------------------------------------------------------------------------------------------------------------ Deferred income taxes 36.6 25.5 - ------------------------------------------------------------------------------------------------------------------------ Accrued postretirement benefits 124.7 121.0 - ------------------------------------------------------------------------------------------------------------------------ Other noncurrent liabilities and deferred credits 63.6 60.2 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 1,417.6 1,267.1 - ------------------------------------------------------------------------------------------------------------------------ Shareholders' equity: - ------------------------------------------------------------------------------------------------------------------------ 4 Percent cumulative preferred stock 11.0 11.0 - ------------------------------------------------------------------------------------------------------------------------ Common stock, par value $1, authorized 300,000,000 shares; issued 87,116,289 shares in 1994 and 1993 87.1 87.1 - ------------------------------------------------------------------------------------------------------------------------ Capital in excess of par value 268.2 262.4 - ------------------------------------------------------------------------------------------------------------------------ Reinvested earnings 846.4 780.3 - ------------------------------------------------------------------------------------------------------------------------ Marketable securities valuation allowance (1.4) (2.2) - ------------------------------------------------------------------------------------------------------------------------ Foreign currency translation (32.8) (56.4) - ------------------------------------------------------------------------------------------------------------------------ Treasury stock, at cost (162.6) (171.7) - ------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 1,015.9 910.5 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $2,433.5 $2,177.6 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
(The accompanying Notes are an integral part of the Consolidated Financial Statements.) 37 - - CONSOLIDATED STATEMENT OF CASH FLOWS CASH FLOWS -- OPERATING ACTIVITIES
(In millions) Years ended June 30, 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Net earnings (loss) $103.8 $(200.4) $127.5 - ------------------------------------------------------------------------------------------------------------------------ Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: - ------------------------------------------------------------------------------------------------------------------------ Depreciation and amortization 104.6 96.1 89.3 - ------------------------------------------------------------------------------------------------------------------------ Restructuring charge 93.0 312.6 - ------------------------------------------------------------------------------------------------------------------------ Cumulative effect of accounting changes 80.6 - ------------------------------------------------------------------------------------------------------------------------ Postretirement benefits 8.3 7.1 - ------------------------------------------------------------------------------------------------------------------------ Deferred income taxes (5.2) (60.6) 19.6 - ------------------------------------------------------------------------------------------------------------------------ Gains on disposals of assets (.6) (2.4) (14.3) - ------------------------------------------------------------------------------------------------------------------------ Discontinued operations (9.7) - ------------------------------------------------------------------------------------------------------------------------ Other, net (21.4) (58.4) (42.1) - ------------------------------------------------------------------------------------------------------------------------ 282.5 174.6 170.3 - ------------------------------------------------------------------------------------------------------------------------ Changes in noncash operating working capital: - ------------------------------------------------------------------------------------------------------------------------ Accounts receivable (12.6) 9.7 (39.1) - ------------------------------------------------------------------------------------------------------------------------ Inventories (11.4) (11.1) (45.4) - ------------------------------------------------------------------------------------------------------------------------ Accounts payable, accrued liabilities and income taxes, net (32.1) (37.6) (61.3) - ------------------------------------------------------------------------------------------------------------------------ Other, net .9 1.0 .1 - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 227.3 136.6 24.6 - ------------------------------------------------------------------------------------------------------------------------ CASH FLOWS -- INVESTING ACTIVITIES Capital expenditures (172.3) (188.3) (150.4) - ------------------------------------------------------------------------------------------------------------------------ Acquisition spending (95.5) (201.2) (35.6) - ------------------------------------------------------------------------------------------------------------------------ IFL dividend receivable 51.9 - ------------------------------------------------------------------------------------------------------------------------ Equity in pre-tax earnings of joint venture, net 14.4 7.7 - ------------------------------------------------------------------------------------------------------------------------ Proceeds from asset disposals 8.6 19.9 44.5 - ------------------------------------------------------------------------------------------------------------------------ Short-term investments 147.8 - ------------------------------------------------------------------------------------------------------------------------ IFL stock sales 139.3 - ------------------------------------------------------------------------------------------------------------------------ Other, net (7.2) (23.3) (4.7) - ------------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by investing activities (200.1) (385.2) 140.9 - ------------------------------------------------------------------------------------------------------------------------ CASH FLOWS -- FINANCING ACTIVITIES Increase (decrease) in short-term debt (58.6) 71.4 (225.0) - ------------------------------------------------------------------------------------------------------------------------ Payments on long-term debt (101.6) (11.1) (64.4) - ------------------------------------------------------------------------------------------------------------------------ Proceeds from long-term debt 196.4 193.3 7.6 - ------------------------------------------------------------------------------------------------------------------------ Issuance of Mallinckrodt common stock 10.9 17.9 33.9 - ------------------------------------------------------------------------------------------------------------------------ Acquisition of treasury stock (6.5) (33.8) - ------------------------------------------------------------------------------------------------------------------------ Dividends paid (37.7) (33.2) (29.5) - ------------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by financing activities 9.4 231.8 (311.2) - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents 36.6 (16.8) (145.7) - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at beginning of year 51.3 68.1 213.8 - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 87.9 $ 51.3 $ 68.1 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
(The accompanying Notes are an integral part of the Consolidated Financial Statements.) 38 - - CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Preferred Common Capital in Reinvested Other Treasury Stock Stock Excess of Earnings Stock (In millions except per share amounts) Par Value - ---------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 1991 $10.0 $ 145.2 $179.1 $ 915.9 $ .4 $(166.4) - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 127.5 - ---------------------------------------------------------------------------------------------------------------------------------- Dividends - ---------------------------------------------------------------------------------------------------------------------------------- 4 Percent cumulative preferred stock ($4.00 a share) (.4) - ---------------------------------------------------------------------------------------------------------------------------------- Common stock ($.3833 a share) (29.1) - ---------------------------------------------------------------------------------------------------------------------------------- Change in par value (116.2) 116.2 - ---------------------------------------------------------------------------------------------------------------------------------- Common stock split 58.1 (58.4) - ---------------------------------------------------------------------------------------------------------------------------------- Stock option exercises 14.4 19.8 - ---------------------------------------------------------------------------------------------------------------------------------- Acquisition of treasury stock (33.8) - ---------------------------------------------------------------------------------------------------------------------------------- Marketable securities valuation adjustment (.7) - ---------------------------------------------------------------------------------------------------------------------------------- Translation adjustment 37.6 - ---------------------------------------------------------------------------------------------------------------------------------- Other 1.0 1.8 2.2 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 1992 11.0 87.1 253.1 1,013.9 37.3 (178.2) - ---------------------------------------------------------------------------------------------------------------------------------- Net loss (200.4) - ---------------------------------------------------------------------------------------------------------------------------------- Dividends - ---------------------------------------------------------------------------------------------------------------------------------- 4 Percent cumulative preferred stock ($4.00 a share) (.4) - ---------------------------------------------------------------------------------------------------------------------------------- Common stock ($.43 a share) (32.8) - ---------------------------------------------------------------------------------------------------------------------------------- Stock option exercises 7.1 10.8 - ---------------------------------------------------------------------------------------------------------------------------------- Acquisition of treasury stock (6.5) - ---------------------------------------------------------------------------------------------------------------------------------- Marketable securities valuation adjustment (.4) - ---------------------------------------------------------------------------------------------------------------------------------- Translation adjustment (95.5) - ---------------------------------------------------------------------------------------------------------------------------------- Other 2.2 2.2 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 1993 11.0 87.1 262.4 780.3 (58.6) (171.7) - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 103.8 - ---------------------------------------------------------------------------------------------------------------------------------- Dividends - ---------------------------------------------------------------------------------------------------------------------------------- 4 Percent cumulative preferred stock ($4.00 a share) (.4) - ---------------------------------------------------------------------------------------------------------------------------------- Common stock ($.485 a share) (37.3) - ---------------------------------------------------------------------------------------------------------------------------------- Stock option exercises 4.0 6.9 - ---------------------------------------------------------------------------------------------------------------------------------- Marketable securities valuation adjustment .8 - ---------------------------------------------------------------------------------------------------------------------------------- Translation adjustment 23.6 - ---------------------------------------------------------------------------------------------------------------------------------- Other 1.8 2.2 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 1994 $11.0 $ 87.1 $268.2 $ 846.4 $(34.2) $(162.6) - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
(The accompanying Notes are an integral part of the Consolidated Financial Statements.) 39 - - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In millions except per share amounts) SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION Financial statements of all majority owned subsidiaries are consolidated. Investments in 20 to 50 percent owned affiliates are reported on the equity method. ACCOUNTING CHANGES In the fourth quarter of 1993 Mallinckrodt adopted Statements of Financial Accounting Standards (FAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions," FAS No. 109 "Accounting for Income Taxes" and FAS No. 112 "Employers' Accounting for Postemployment Benefits," all retroactive to July 1, 1992. See also Notes 8 and 13. FOREIGN CURRENCY TRANSLATION The financial statements of most of the Company's international affiliates are translated into U.S. dollars using current exchange rates. Unrealized translation adjustments are included in shareholders' equity in the Consolidated Balance Sheet. The financial statements of international affiliates that operate in hyperinflationary economies, principally Brazil and Argentina, are translated at either current or historical exchange rates, as appropriate. Unrealized translation adjustments are included in operating results for these affiliates. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist primarily of certificates of deposit, time deposits and other short-term securities with maturities of three months or less from the date of purchase. INVENTORIES Inventories are valued at the lower of cost or market. Cost for inventories is determined on either an average or first-in, first-out basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. Depreciation is based upon estimated useful lives of 15 to 45 years for buildings and 4 to 15 years for machinery and equipment, using principally the straight-line method. When property or equipment is disposed, the related cost and accumulated depreciation are eliminated from the respective accounts. Any gain or loss on disposition is reflected in current period income or expense. RECLASSIFICATIONS Certain amounts in prior years have been reclassified to conform to the current year presentation. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 1 CHANGES IN BUSINESS NAME CHANGE AND HEADQUARTERS RELOCATION On March 15, 1994, shareholders approved changing the Company's name from IMCERA Group Inc. to Mallinckrodt Group Inc. Simultaneous with the corporate name change, Mallinckrodt Specialty Chemicals changed its name to Mallinckrodt Chemical, Inc. and Pitman-Moore changed its name to Mallinckrodt Veterinary, Inc. In March 1994, the Company moved its corporate headquarters from Northbrook, Illinois, to St. Louis, Missouri. RESTRUCTURING PROGRAMS In the fourth quarter of 1994 the Company recorded a restructuring charge of $93.9 million, $58.8 million after taxes, or $.76 per share, relating to Mallinckrodt Medical and Mallinckrodt Veterinary. Restructuring actions related to the program are in process and are expected to be substantially complete in one year. The Mallinckrodt Medical pre-tax restructuring charge of $73.9 million included the reorganization of the current medical specialty oriented U.S. sales structure into a unified organization divided into geographical districts; reorganization to reduce, centralize and standardize certain non-sales related functions and management processes; rationalization of manufacturing operations for substantial worldwide cost and sourcing improvements; and severance costs related to an associated work-force reduction. Pre-tax cash expenditures for this restructuring should approximate $65 million, consisting of $28 million for severance costs for about 500 people at various locations around the world, $15 million for consulting, $13 million for manufacturing rationalization and $9 million for other items. The non-cash pre-tax portion of the charge should approximate $9 million, primarily relating to manufacturing rationalization. Also included in the restructuring is an additional $20 million pre-tax charge to adjust a prior year provision associated with Mallinckrodt Veterinary's decision to discontinue development of porcine somatotropin (PST) in May 1993. In the fourth quarter of 1993 the Company recorded a restructuring charge of $334.1 million, $242.2 million after taxes, or $3.13 per share relating to Mallinckrodt Veterinary and Mallinckrodt Chemical. Restructuring actions related to the program are substantially complete at June 30, 1994 and the remainder will be complete in approximately one year. Pre-tax cash expenditures for restructuring charges are expected to approximate the original estimate of $173 million and are primarily related to severance costs of $54 million, lease costs related to a closed facility of $55 million, consulting costs of $15 million, and manufacturing rationalization and other costs of $49 million. As of June 30, 1994, $79 million has been spent relating to the restructuring. The $161 million non-cash portion of the charges primarily related to the write-off of plant facilities. 40 The Mallinckrodt Veterinary 1993 pre-tax restructuring charge of $282.8 million included the discontinuance of the development of the Grolene brand of porcine somatotropin, including manufacturing and support facilities; closure and consolidation of manufacturing and other distribution and support facilities; redefinition and reorganization of research and development, commercial and administrative functions; exit of certain animal health businesses; and severance costs related to a work-force reduction of approximately 1,000 employees. As part of the 1993 program, Mallinckrodt Chemical also recorded a pre-tax charge of $51.3 million, primarily to exit its aromatic fluorine intermediates and photochemical businesses and close or sell the related facilities. The restructuring charge included approximately $40 million for write-down of carrying value of plant facilities and $11 million of cash expenditures. ACQUISITIONS In 1994, Mallinckrodt Chemical acquired Catalyst Resources, Inc., a manufacturer of polymerization and chemical catalysts for $61.2 million, and Mallinckrodt Medical acquired DAR S.p.A., a manufacturer of anesthesiology and respiratory care products for $28.0 million. These acquisitions were accounted for as purchases. In 1993, Mallinckrodt Medical acquired the businesses of HemoCue Intressenter, A.B., a manufacturer of point-of-care blood chemistry systems, and the tracheostomy products business of Sorin Biomedical, Inc. The acquisitions were accounted for as purchases. The cost of these acquisitions, including acquisition accruals, totaled $198.0 million. The results of operations of the above acquisitions were included in the consolidated financial statements from their respective acquisition dates. Results of operations for periods prior to acquisition were not material to Mallinckrodt. TASTEMAKER JOINT VENTURE Effective February 1, 1992, the Fries & Fries, Inc. unit of Mallinckrodt Chemical and Hercules Incorporated's flavors businesses were combined to form a 50/50 joint-venture partnership. Results subsequent to the formation of the joint venture were recorded on a pre-tax equity basis. The 1992 results included charges totaling $3.8 million, $2.4 million after taxes, or $.03 per share, for combining the two businesses. Related income taxes were included in the Company's consolidated income tax provision. DIVESTITURES In 1992, Mallinckrodt Chemical disposed of its electronic and cosmetic chemical businesses. Results of operations and the effect of the disposition of these businesses were not material to Mallinckrodt. DISCONTINUED OPERATIONS The discontinued operations charges for 1994, 1993 and 1992 primarily included environmental and related litigation costs and postretirement benefits costs related to operations previously disposed. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 2 EARNINGS PER COMMON SHARE Earnings per common share amounts were computed on the basis of the weighted average number of common and common equivalent shares outstanding. Such weighted average shares used in the computations were 77,607,416 in 1994; 77,408,668 in 1993 and 77,801,473 in 1992. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 3 SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------------------------------------------- 1994 1993 1992 - -------------------------------------------------------------------------------- Interest paid $33.0 $35.8 $34.1 - -------------------------------------------------------------------------------- Income taxes paid 37.8 35.1 63.3 - -------------------------------------------------------------------------------- Non-cash investing and financing activities: - -------------------------------------------------------------------------------- Assumption of liabilities related to acquisitions 12.2 - -------------------------------------------------------------------------------- Issuance of common stock for restricted stock awards 4.0 4.4 5.0 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE 4 INVENTORIES
- -------------------------------------------------------------------------------- At June 30, 1994 1993 - -------------------------------------------------------------------------------- Mallinckrodt Chemical $106.8 $ 94.1 - -------------------------------------------------------------------------------- Mallinckrodt Medical 141.5 128.5 - -------------------------------------------------------------------------------- Mallinckrodt Veterinary 129.3 131.6 - -------------------------------------------------------------------------------- Intersegment eliminations (.7) (.8) - -------------------------------------------------------------------------------- $376.9 $353.4 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
41 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 5 INVESTMENTS AND LONG-TERM RECEIVABLES
- ------------------------------------------------------------------------------- At June 30, 1994 1993 - ------------------------------------------------------------------------------- Tastemaker joint venture $ 74.9 $ 62.0 - ------------------------------------------------------------------------------- Other investments 21.4 19.1 - ------------------------------------------------------------------------------- Other long-term receivables, net 50.7 51.5 - ------------------------------------------------------------------------------- $147.0 $132.6 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
NOTE 6 PROPERTY, PLANT AND EQUIPMENT
- ------------------------------------------------------------------------------- At June 30, 1994 1993 - ------------------------------------------------------------------------------- Land $ 69.3 $ 67.5 - ------------------------------------------------------------------------------- Buildings and leasehold improvements 352.9 270.1 - ------------------------------------------------------------------------------- Machinery and equipment 872.4 695.5 - ------------------------------------------------------------------------------- Construction in progress 101.4 159.8 - ------------------------------------------------------------------------------- 1,396.0 1,192.9 - ------------------------------------------------------------------------------- Accumulated depreciation (532.8) (494.0) - ------------------------------------------------------------------------------- $ 863.2 $ 698.9 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Capitalized interest costs were $3.7 million in 1994, $6.3 million in 1993 and $1.8 million in 1992. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
NOTE 7 INTANGIBLE ASSETS
- ------------------------------------------------------------------------------- At June 30, 1994 1993 - ------------------------------------------------------------------------------- Goodwill and other intangibles $518.9 $529.0 - ------------------------------------------------------------------------------- Patents and technology 63.7 55.5 - ------------------------------------------------------------------------------- Contracts 18.8 - ------------------------------------------------------------------------------- 582.6 603.3 - ------------------------------------------------------------------------------- Accumulated amortization (111.0) (150.2) - ------------------------------------------------------------------------------- 471.6 453.1 - ------------------------------------------------------------------------------- Deferred charges 17.7 13.8 - ------------------------------------------------------------------------------- $489.3 $466.9 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Identifiable intangible assets are amortized over estimated useful lives of up to 5 years for contracts and 8 to 25 years for patents and technology. Goodwill and other intangibles are amortized primarily on a straight-line basis over 10 to 40 years. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 8 INCOME TAXES In the first quarter of 1994, the Revenue Reconciliation Act of 1993 was signed. This Act increased the Federal statutory income tax rate 1 percent, to 35 percent, retroactive to January 1, 1993. Additionally, in the third quarter certain foreign (primarily German and Swedish) tax rates decreased. The net impact of these rate changes resulted in a non-recurring tax benefit of $3.0 million related to the revaluation of deferred taxes in accordance with FAS 109, "Accounting for Income Taxes." In the fourth quarter of 1993, the Company adopted the provisions of FAS 109, retroactive to July 1, 1992. The adoption of this standard changed the Company's method of accounting for income taxes from the deferred method to the liability method. The cumulative effect of this change at July 1, 1992 pertaining to years prior to 1993, amounted to a charge of $16.5 million, or $.21 per share. Apart from the cumulative effect charge, the impact of this change on 1993 continuing operations was favorable by $1.6 million, or $.02 per share. Financial statements for 1992 were not restated. Results shown below for 1992 were determined using the deferred method. Included in the FAS 109 adoption at July 1, 1992, were valuation allowances of $15.7 million. Income taxes included in the Consolidated Statement of Operations were: - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Continuing operations $64.0 $(19.3) $74.0 - ------------------------------------------------------------------------------- Discontinued operations (2.0) (3.1) 7.3 - ------------------------------------------------------------------------------- Cumulative effect of accounting changes 19.4 - ------------------------------------------------------------------------------- $62.0 $ (3.0) $81.3 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The geographical sources of earnings (loss) from continuing operations before income taxes were:
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- United States $ 87.1 $(126.2) $122.4 - ------------------------------------------------------------------------------- Outside United States 84.3 (6.9) 80.4 - ------------------------------------------------------------------------------- $171.4 $(133.1) $202.8 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
42 The components of the income tax provision (benefit) charged (credited) to continuing operations follow. The deferred tax provision results from differences in the recognition of income and expense for tax and financial reporting purposes; primarily depreciation, restructuring charges and benefit costs.
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Current: - ------------------------------------------------------------------------------- U.S. Federal $ 38.0 $ 15.0 $ 12.7 - ------------------------------------------------------------------------------- U.S. State and local 6.5 6.5 5.2 - ------------------------------------------------------------------------------- Outside United States 25.0 19.8 16.3 - ------------------------------------------------------------------------------- 69.5 41.3 34.2 - ------------------------------------------------------------------------------- Deferred: - ------------------------------------------------------------------------------- U.S. Federal (13.0) (57.3) 26.2 - ------------------------------------------------------------------------------- U.S. State and local .8 (2.9) 1.8 - ------------------------------------------------------------------------------- Outside United States 6.7 (.4) 11.8 - ------------------------------------------------------------------------------- (5.5) (60.6) 39.8 - ------------------------------------------------------------------------------- $ 64.0 $(19.3) $74.0 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Factors causing the effective tax rate for continuing operations to differ from the U.S. Federal statutory rate were:
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Computed tax at the U.S. Federal statutory rate $60.0 $(45.3) $69.0 - ------------------------------------------------------------------------------- Statutory rate changes (3.0) - ------------------------------------------------------------------------------- Adjustments to income tax accruals (5.0) (5.0) - ------------------------------------------------------------------------------- State income taxes, net of Federal benefit 4.7 5.8 4.6 - ------------------------------------------------------------------------------- Nondeductible goodwill 2.7 3.0 3.0 - ------------------------------------------------------------------------------- Restructuring 21.7 - ------------------------------------------------------------------------------- Other items (none in excess of 5% of computed tax) (.4) .5 2.4 - ------------------------------------------------------------------------------- Income tax provision (benefit) $64.0 $(19.3) $74.0 - ------------------------------------------------------------------------------- Effective tax rate 37.3% 14.5% 36.5% - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The Company's effective tax rate for 1994 before the net tax benefit from the restructuring charge and the previously discussed statutory rate changes was 38.5 percent. The 1993 effective rate before the net benefit for restructuring and FAS 109 adoption was 36.8 percent. The favorable adjustments to income tax accruals included in the preceding table resulted from the conclusion of income tax audits that spanned a number of years. The Company had the following deferred tax balances at June 30, 1994 and 1993:
- ------------------------------------------------------------------------------- 1994 1993 - ------------------------------------------------------------------------------- Deferred tax assets: Restructuring accruals $ 97.9 $ 84.1 - ------------------------------------------------------------------------------- Employee benefits 57.6 51.6 - ------------------------------------------------------------------------------- Net operating losses 45.5 45.3 - ------------------------------------------------------------------------------- Alternative minimum tax credit 12.9 18.9 - ------------------------------------------------------------------------------- Environmental accruals 5.4 4.1 - ------------------------------------------------------------------------------- Other, net 2.4 - ------------------------------------------------------------------------------- Gross deferred tax assets 221.7 204.0 - ------------------------------------------------------------------------------- Valuation allowance (49.8) (49.9) - ------------------------------------------------------------------------------- Total deferred tax assets 171.9 154.1 - ------------------------------------------------------------------------------- Deferred tax liabilities: Property, plant and equipment 86.7 64.5 - ------------------------------------------------------------------------------- Receivables 24.1 26.7 - ------------------------------------------------------------------------------- Intangible assets 20.2 26.7 - ------------------------------------------------------------------------------- Other, net .2 - ------------------------------------------------------------------------------- Total deferred tax liabilities 131.0 118.1 - ------------------------------------------------------------------------------- Net deferred tax assets $ 40.9 $ 36.0 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
43 The alternative minimum tax credit of $12.9 million is available to reduce future Federal taxes payable and has an unlimited carryforward period. The tax benefit of the Company's net operating loss carryforwards of $45.5 million relate to its non-U.S. operations, primarily in Germany ($25.5 million with no expiration date). Undistributed earnings of certain subsidiaries outside the United States are considered to be permanently invested. Accordingly, no provision for income taxes was made for undistributed earnings of such subsidiaries which aggregated $155.7 million at June 30, 1994. The income tax provisions for discontinued operations reflects charges for book and tax basis differences relative to the Company's investment in IMC Fertilizer Group, Inc. (IFL) stock that amounted to $9.7 million in 1992. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 9 ACCRUED LIABILITIES
- ------------------------------------------------------------------------------- At June 30, 1994 1993 - ------------------------------------------------------------------------------- Restructuring accruals $176.1 $147.0 - ------------------------------------------------------------------------------- Salaries, wages and bonuses 29.5 22.6 - ------------------------------------------------------------------------------- Former operations 17.3 19.1 - ------------------------------------------------------------------------------- Taxes other than income taxes 15.6 14.3 - ------------------------------------------------------------------------------- Sales promotions and incentives 9.1 16.6 - ------------------------------------------------------------------------------- Interest 8.3 7.6 - ------------------------------------------------------------------------------- Pension 7.7 9.7 - ------------------------------------------------------------------------------- Other 92.4 75.0 - ------------------------------------------------------------------------------- $356.0 $311.9 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 10 DEBT The components of short-term debt were:
- ------------------------------------------------------------------------------- At June 30, 1994 1993 - ------------------------------------------------------------------------------- Commercial paper $ 72.5 $ 90.5 - ------------------------------------------------------------------------------- Notes payable 55.0 84.2 - ------------------------------------------------------------------------------- Current maturities of long-term debt 20.3 14.7 - ------------------------------------------------------------------------------- $147.8 $189.4 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The components of long-term debt were:
- ------------------------------------------------------------------------------- At June 30, 1994 1993 - ------------------------------------------------------------------------------- Commercial paper $100.0 $190.0 - ------------------------------------------------------------------------------- 9.875% debentures due in annual installments of $15.0 million, beginning in 2002, with final payment of $12.8 million in 2011 134.6 134.6 - ------------------------------------------------------------------------------- 8.75% promissory note due in annual installments of $10.3 million, with final payment of $.5 million in 1998 31.3 51.8 - ------------------------------------------------------------------------------- 7% debentures due 2013 98.5 - ------------------------------------------------------------------------------- 6% notes due 2003 99.2 - ------------------------------------------------------------------------------- Other 78.7 65.9 - ------------------------------------------------------------------------------- 542.3 442.3 - ------------------------------------------------------------------------------- Less current maturities 20.3 14.7 - ------------------------------------------------------------------------------- $522.0 $427.6 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
At June 30, 1994 and 1993, commercial paper totaling $100.0 million and $190.0 million respectively, has been classified as long-term debt as it is backed by long-term lines of credit. The 9.875% debentures are redeemable at the option of Mallinckrodt at 100 percent in 2001 and thereafter. The 7% debentures and 6% notes are not redeemable prior to maturity. Maturities of long-term debt for the next five years are: 1995-$20.3 million; 1996-$18.3 million; 1997-$128.7 million (includes $100.0 million of commercial paper); 1998-$19.4 million; and 1999-$1.7 million. Financial instruments included in the Consolidated Balance Sheet were at amounts approximating fair value at June 30, 1994. The fair value of the long- term debt was estimated based on the current interest rates available to the Company for debt with similar maturities and characteristics. 44 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 11 LINES OF CREDIT The Company has a $350 million private-placement commercial paper program. This program is backed by $450 million of U.S. lines of credit of which $350 million is available until August 1996 and $100 million is up for renewal in August 1994. Under the terms of these agreements, interest rates are determined at the time of borrowing and are based on London Interbank Offered Rates plus .40 percent, or other alternative rates. Commercial paper and borrowings under the U.S. credit lines of $172.5 million and $10.0 million, respectively, were outstanding at June 30, 1994. Non-U.S. lines of credit totaling $218.3 million are also available and borrowings under these lines were $45.0 million at June 30, 1994. These non-U.S. lines are cancellable at any time. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 12 PENSION PLANS The Company has pension plans covering substantially all its employees that provide for retirement benefits based on years of service and the level of compensation for the highest three to five years occurring generally within a period of up to 10 years prior to retirement. Contributions to the U.S. plans meet ERISA minimum funding requirements. Pension expense for continuing operations follows:
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Service cost $ 19.2 $ 17.1 $ 15.2 - ------------------------------------------------------------------------------- Interest cost on projected benefit obligation 30.8 29.9 27.8 - ------------------------------------------------------------------------------- Earnings on plan assets (21.2) (35.0) (39.1) - ------------------------------------------------------------------------------- Net amortization of initial unrecognized asset and deferral of subsequent unrecognized net gains and losses (7.5) 9.3 13.5 - ------------------------------------------------------------------------------- $ 21.3 $ 21.3 $ 17.4 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
U.S. pension expense in 1994, 1993 and 1992 was $18.1 million, $15.7 million and $12.4 million, respectively. Assumptions used in determining the actuarial present value of benefit obligations follow:
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Discount rate 8.0% 8.5% 9.0% - ------------------------------------------------------------------------------- Long-term rate of return on plan assets 10.0% 10.0% 10.0% - ------------------------------------------------------------------------------- Compensation increase rate 5.5% 6.0% 6.0% - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The plans' assets mostly relate to U.S. plans and consist primarily of corporate equities, U.S. government debt securities and units of participation in a collective short-term investment fund. The funded status of Mallinckrodt's U.S. and non-U.S. pension plans and amounts recognized in the balance sheet follow:
1994 1993 ----------------------------------------- ------------------------------------------ Plans With Assets Plans With Plans With Assets Plans With In Excess of Accumulated Benefits In Excess of Accumulated Benefits Accumulated Benefits In Excess of Assets Accumulated Benefits In Excess of Assets - ---------------------------------------------------------------------------------------------------------------------------------- Assets at fair value $292.0 $ 41.2 $304.8 $ 29.3 - ---------------------------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligation: - ---------------------------------------------------------------------------------------------------------------------------------- Vested benefits 242.8 56.7 218.5 49.0 - ---------------------------------------------------------------------------------------------------------------------------------- Nonvested benefits 5.5 6.5 6.3 4.0 - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation 248.3 63.2 224.8 53.0 - ---------------------------------------------------------------------------------------------------------------------------------- Projected future salary increases 67.6 23.4 84.6 14.7 - ---------------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation 315.9 86.6 309.4 67.7 - ---------------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets (23.9) (45.4) (4.6) (38.4) - ---------------------------------------------------------------------------------------------------------------------------------- Items not yet recognized in earnings: - ---------------------------------------------------------------------------------------------------------------------------------- Unrecognized net loss 28.2 7.9 7.3 4.3 - ---------------------------------------------------------------------------------------------------------------------------------- Unamortized transition (asset) liability (2.4) 12.7 (2.0) 14.3 - ---------------------------------------------------------------------------------------------------------------------------------- Prepaid (accrued) pension liability $ 1.9 $(24.8) $ .7 $(19.8) - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
45 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 13 POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS Mallinckrodt provides certain health care benefits for U.S. salaried and hourly retired employees. Employees may become eligible for health care benefits if they retire after attaining specified age and service requirements while they worked for the Company. Health care benefits are paid directly by Mallinckrodt. In the fourth quarter of 1993, the Company adopted FAS 106 "Employers" Accounting for Postretirement Benefits Other Than Pensions' retroactive to July 1, 1992. This statement requires that the cost of these benefits be accrued during the employees' working careers. The Company elected to immediately recognize the cumulative effect of adoption rather than amortize it over future periods. The cumulative effect of the change as of July 1, 1992, was a charge of $63.0 million, or $.81 per share, after a deferred tax benefit of $35.3 million. The 1993 incremental effect of FAS 106 was a charge of $7.1 million, $4.5 million after taxes, or $.06 a share. The cost of providing these benefits was previously recognized in the period in which the benefits were paid. Net periodic postretirement benefits expense for 1994 and 1993 consisted of the following:
- ------------------------------------------------------------------------------- 1994 1993 - ------------------------------------------------------------------------------- Service cost for benefits earned during the year $ 3.6 $ 3.8 - ------------------------------------------------------------------------------- Interest cost on benefit obligation 10.4 10.7 - ------------------------------------------------------------------------------- $ 14.0 $ 14.5 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The following table presents the plan's funded status reconciled with amounts recognized in the Company's statement of financial postition:
- ------------------------------------------------------------------------------- 1994 1993 - ------------------------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO): - ------------------------------------------------------------------------------- Retirees $ 94.7 $ 75.9 - ------------------------------------------------------------------------------- Active employees 56.5 46.0 - ------------------------------------------------------------------------------- Accumulated postretirement benefit obligation in excess of plan assets 151.2 121.9 - ------------------------------------------------------------------------------- Unrecognized net loss (26.5) - ------------------------------------------------------------------------------- Accrued postretirement benefit cost $124.7 $121.9 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The discount rate used in determining the APBO at June 30, 1994 and 1993, was 8.0 percent and 8.5 percent, respectively. The assumed health care cost trend rate used in measuring the APBO at June 30, 1994 was 10.5 percent, gradually declining to 5.5 percent in 2005 and thereafter. At June 30, 1993 a rate of 11.0 percent was used, gradually declining to 5.5 percent in 2004 and thereafter. A one percentage point increase in the health care cost trend rate would increase the APBO as of June 30, 1994, by $20.6 million and the aggregate service and interest cost by $2.8 million. The 1992 cost for these postretirement benefits on a pay-as-you-go basis was $4.4 million, all of which was included in continuing operations. Also in the fourth quarter of 1993, the Company adopted FAS 112 "Employers' Accounting for Postemployment Benefits." This statement requires the accrual method of recognizing the cost of postemployment benefits such as disability- related benefits. The cumulative effect of adopting FAS 112 retroactively to July 1, 1992, was a charge of $1.1 million after taxes, or $.02 per share. The incremental effect of this change on 1993 operations was a charge of $1.4 million, $.9 million after taxes, or $.01 per share. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 14 CAPITAL STOCK The Company has authorized and issued 100,000 shares, 98,330 outstanding at June 30, 1994, par value $100, 4 Percent Cumulative preferred stock. This stock, with voting rights, is redeemable at the Company's option at $110 a share. During the three years ended June 30, 1994, the number of issued and outstanding shares did not change. At June 30, 1994, the Company has authorized 1,400,000 shares, par value $1, of series preferred stock, none of which is outstanding. Each outstanding common share includes a non-voting common stock purchase right. If a person or group acquires or has the right to acquire 20 percent or more of the common stock or commences a tender offer for 30 percent or more of the common stock, the rights become exercisable by the holder who may then purchase $167 worth of common stock for $83 unless, in lieu thereof, the Board of Directors causes the exchange of each outstanding right for one share of common stock (in either case exclusive of the rights held by the acquiring person or group which are voided). In the event of a merger or sale of 50 percent or more of the Company's assets, the rights may in certain circumstances entitle the holder to purchase $167 worth of stock in the surviving entity for $83. The rights may be redeemed by the Board at a price of $.017 per right at any time before they become exercisable, and unless they become exercisable, they will expire March 31, 1996. The Board of Directors has approved a three year incentive award program for executive officers effective July 1, 1994 which expires June 30, 1997. There are 1,000,000 common shares reserved for issuance under this plan. 46 Common shares reserved at June 30, 1994, consisted of the following:
- ------------------------------------------------------------------------------- Exercise of common stock purchase rights 88,408,928 - ------------------------------------------------------------------------------- Exercise of stock options and granting of stock awards 11,402,695 - ------------------------------------------------------------------------------- 99,811,623 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Changes in the number of shares of common stock issued and in treasury were as follows:
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Common stock issued 87,116,289 87,116,289 87,116,289 - ------------------------------------------------------------------------------- Treasury common stock: Balance, beginning of year 10,671,514 11,371,742 11,903,220 - ------------------------------------------------------------------------------- Stock options exercised (429,645) (833,560) (1,404,262) - ------------------------------------------------------------------------------- Purchased 19 274,267 1,029,123 - ------------------------------------------------------------------------------- (Awards) cancellations of restricted shares (131,832) (140,935) (156,339) - ------------------------------------------------------------------------------- Balance, end of year 10,110,056 10,671,514 11,371,742 - ------------------------------------------------------------------------------- Common stock out- standing, end of year 77,006,233 76,444,775 75,744,547 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 15 STOCK PLANS Three non-qualified stock option plans adopted in 1973, 1981 and 1990, as amended, provide for granting options to purchase up to 21,817,650 shares of common stock at prices not less than 100 percent of market price (as defined) at the date of grant. Options under these plans are exercisable over nine years beginning one year after the date of grant and are limited to 50 percent during the first year of eligibility. A total of 16,901,318 shares was granted under these plans through June 30, 1994. Information on stock option activity follows:
- ------------------------------------------------------------------------------- Number of Options Price Range 1994 1993 - ------------------------------------------------------------------------------- Outstanding, beginning of year $10-40 4,883,358 4,645,812 - ------------------------------------------------------------------------------- Granted 25-38 1,363,680 1,325,749 - ------------------------------------------------------------------------------- Cancelled 10-40 (465,661) (254,643) - ------------------------------------------------------------------------------- Exercised 10-37 (429,645) (833,560) - ------------------------------------------------------------------------------- Outstanding, end of year 10-40 5,351,732 4,883,358 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- At June 30, - ------------------------------------------------------------------------------- Exercisable 3,478,030 3,061,389 - ------------------------------------------------------------------------------- Reserved for future option grants 4,980,448 6,010,299 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The average exercise price of outstanding stock options at June 30, 1994, was $30.00 a share, based on an aggregate exercise price of about $161 million. Outstanding stock options will expire over a period ending no later than June 13, 2004. The 1973 non-qualified stock option and award plan also provides for the award of restricted shares of Mallinckrodt's common stock to executive officers. Under provisions of the plan, the grantee makes no cash payment for the award and the shares are held in escrow until vested, with the grantee being unable to dispose of the restricted shares until vested. Upon forfeiture of any share of restricted stock in accordance with the stock option and award plan, or the terms and conditions of the award, the shares would automatically be transferred to and reacquired by the Company at no cost. In 1994 and 1993, the Company issued from its treasury stock 131,832 and 140,935 restricted shares, respectively. A total of 424,106 shares of restricted stock previously awarded to executive officers vested on June 30, 1994. An additional award of 5,000 shares of restricted stock will vest on April 3, 1996. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 16 INTERNATIONAL OPERATIONS Sales from continuing operations in the United States to unaffiliated customers in other geographic areas were as follows:
- ------------------------------------------------------------------------------- 1994 1993 1992 - ------------------------------------------------------------------------------- Asia/Pacific $30.3 $17.4 $15.8 - ------------------------------------------------------------------------------- Latin America 24.6 21.1 20.7 - ------------------------------------------------------------------------------- Europe 13.5 12.4 8.4 - ------------------------------------------------------------------------------- Other 5.6 4.3 4.1 - ------------------------------------------------------------------------------- $74.0 $55.2 $49.0 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
47 Net sales, earnings from continuing operations before income taxes, and identifiable assets by geographic areas follow:
Net Sales to Unaffiliated Customers 1994 1993 1992 - ------------------------------------------------------------------------------- United States $ 1,223.3 $ 1,121.2 $1,106.3 - ------------------------------------------------------------------------------- Europe 384.8 353.2 317.6 - ------------------------------------------------------------------------------- Asia/Pacific 160.4 161.4 123.5 - ------------------------------------------------------------------------------- Latin America 117.1 112.3 97.0 - ------------------------------------------------------------------------------- Canada 54.5 48.2 58.5 - ------------------------------------------------------------------------------- Consolidated $ 1,940.1 $ 1,796.3 $1,702.9 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Earnings - ------------------------------------------------------------------------------- United States $ 220.0 $ 181.9 $ 179.3 - ------------------------------------------------------------------------------- Europe 67.3 56.5 50.9 - ------------------------------------------------------------------------------- Asia/Pacific 14.6 16.4 15.9 - ------------------------------------------------------------------------------- Latin America 17.8 16.0 12.7 - ------------------------------------------------------------------------------- Canada 4.0 (.4) 2.1 - ------------------------------------------------------------------------------- Restructuring charge (93.9) (334.1) - ------------------------------------------------------------------------------- Corporate (30.2) (35.5) (30.5) - ------------------------------------------------------------------------------- Eliminations (6.5) (9.8) (4.9) - ------------------------------------------------------------------------------- Operating earnings 193.1 (109.0) 225.5 - ------------------------------------------------------------------------------- Equity in pre-tax earnings of joint venture 18.5 10.6 1.6 - ------------------------------------------------------------------------------- Interest expense, net (40.2) (34.7) (24.3) - ------------------------------------------------------------------------------- Consolidated $ 171.4 $ (133.1) $ 202.8 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Assets - ------------------------------------------------------------------------------- United States $1,323.2 $1,192.7 $1,152.0 - ------------------------------------------------------------------------------- Europe 740.0 605.6 504.9 - ------------------------------------------------------------------------------- Asia/Pacific 171.8 155.7 148.8 - ------------------------------------------------------------------------------- Latin America 80.6 78.6 69.1 - ------------------------------------------------------------------------------- Canada 33.3 26.1 33.5 - ------------------------------------------------------------------------------- Corporate 96.9 132.8 151.8 - ------------------------------------------------------------------------------- Eliminations (12.3) (13.9) (9.3) - ------------------------------------------------------------------------------- Consolidated $2,433.5 $2,177.6 $2,050.8 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Restructuring charges by region were: - ------------------------------------------------------------------------------- United States $ 93.9 $ 257.9 - ------------------------------------------------------------------------------- Europe 35.4 - ------------------------------------------------------------------------------- Asia/Pacific 33.0 - ------------------------------------------------------------------------------- Latin America 7.8 - ------------------------------------------------------------------------------- $ 93.9 $ 334.1 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Transfers of product between geographic areas are at prices approximating those charged to unaffiliated customers. Net foreign exchange translation losses from businesses in hyperinflationary economies aggregated $4.2 million, $5.8 million and $5.5 million in 1994, 1993 and 1992, respectively, and have been included in "Other operating (income) expense, net" in the Consolidated Statement of Operations. These translation effects were primarily from Mallinckrodt Veterinary operations in Latin America. Translation effects for all of Mallinckrodt's businesses were not material in the periods presented. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 17 BUSINESS SEGMENTS The tables on page 35 show Mallinckrodt's continuing worldwide operations, which are organized in three industry segments as follows: MALLINCKRODT CHEMICAL Production and sale of analgesics and medicinal narcotics used by pharmaceutical companies; catalysts, specialty inorganics, stearates and laboratory chemicals used by industry and research organizations. Through the Tastemaker joint venture, the company also participates in the flavors business. MALLINCKRODT MEDICAL Production and sale of products used primarily in hospitals, including x-ray contrast media, interventional products, diagnostic and therapeutic radiopharmaceuticals, airway management products, temperature monitoring products, and blood gas and vital sign monitoring systems. MALLINCKRODT VETERINARY Production and sale of pharmaceuticals, biologicals, veterinary specialties, mineral feed supplements and other health-related products for food and companion animals. NONRECURRING CHARGES Restructuring charges recorded in 1994 and 1993 are discussed in Note 1. The impact of adopting new accounting standards in 1993 is discussed in Notes 8 and 13. In 1992, costs associated with nonrecurring deficiencies in technical manufacturing controls at Mallinckrodt Veterinary's Kansas City, Kansas, manufacturing facility negatively impacted results by $4.8 million, $3.0 million after taxes, or $.04 per share. 48 Additionally, in the fourth quarter of 1992 Mallinckrodt Veterinary incurred $12.8 million of restructuring costs. In that same quarter, adjustments were made to certain excess accruals that were established in 1990 at the time Mallinckrodt Veterinary acquired Coopers Animal Health. The provision for restructuring costs was essentially offset by the accrual adjustments. In 1993, corporate expense included charges of $5.5 million, $3.4 million after taxes, or $.04 per share, from executive resignations resulting from the performance of Mallinckrodt Veterinary which were reported in the Consolidated Statement of Operations under "Selling, administrative and general expenses." IMPACT OF ACCOUNTING CHANGES In addition to the cumulative effect impacts, FAS 106, and to a much lesser extent FAS 112, reduced the 1993 operating earnings of each business group and increased corporate expense by the following amounts: Mallinckrodt Chemical $3.0 - ------------------------------------------------------------------------------- Mallinckrodt Medical 3.5 - ------------------------------------------------------------------------------- Mallinckrodt Veterinary 1.6 - ------------------------------------------------------------------------------- Corporate .4 - ------------------------------------------------------------------------------- $8.5 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
NOTE 18 COMMITMENTS The Company leases office space, data processing equipment, buildings, and machinery and equipment. Rent expense for continuing operations in 1994, 1993 and 1992 related to operating leases was $32.1 million, $29.6 million and $26.1 million, respectively. Minimum rent commitments for continuing operations at June 30, 1994, under operating leases with a remaining non-cancellable period exceeding one year follow:
- ------------------------------------------------------------------------------- Years ending June 30, - ------------------------------------------------------------------------------- 1995 $132.5 - ------------------------------------------------------------------------------- 1996 23.9 - ------------------------------------------------------------------------------- 1997 17.8 - ------------------------------------------------------------------------------- 1998 15.4 - ------------------------------------------------------------------------------- 1999 14.1 - ------------------------------------------------------------------------------- Later years 42.8 - ------------------------------------------------------------------------------- $146.5 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The Company periodically uses forward contracts and swaps to hedge foreign currency inventory purchase commitments, debt denominated in a foreign currency and interest rate exposures. Gains and losses on hedge contracts are reported as a component of the related transaction. At June 30, 1994, forward exchange contracts with an aggregate contract value of $232.5 million were outstanding. The difference between the recorded value of the contracts and their June 30, 1994, market value was not material. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 19 CONTINGENCIES The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. In addition, in connection with laws and regulations pertaining to the protection of the environment, the Company is a party to several environmental remediation investigations and clean-ups and, along with other companies, has been named a "potentially responsible party" for certain waste disposal sites. Each of these matters is subject to various uncertainties, and it is possible that some of these matters will be decided unfavorably against the Company. The Company has established accruals for matters that are in its view probable and reasonably estimable. Based on information presently available, management believes that existing accruals are sufficient to satisfy any known environmental liabilities. Further, any additional liability that may ultimately result from the resolution of these matters is not expected to have a material effect on Mallinckrodt's business or financial condition taken as a whole. 49 - - QUARTERLY RESULTS (Unaudited) FISCAL 1994
(In millions except per share amounts) Quarter First Second Third Fourth Year - ----------------------------------------------------------------------------------------------------------------------------- Net sales $444.9 $466.3 $486.7 $542.2 $1,940.1 - ----------------------------------------------------------------------------------------------------------------------------- Gross margins 202.4 215.3 229.5 255.6 902.8 - ----------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations 35.3 36.7 42.9 (7.5) 107.4 - ----------------------------------------------------------------------------------------------------------------------------- Discontinued operations (.8) (.7) (.6) (1.5) (3.6) - ----------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) 34.5 36.0 42.3 (9.0) 103.8 - ----------------------------------------------------------------------------------------------------------------------------- Preferred stock dividends (.1) (.1) (.1) (.1) (.4) - ----------------------------------------------------------------------------------------------------------------------------- Available for common shareholders $ 34.4 $ 35.9 $ 42.2 $ (9.1) $ 103.4 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Continuing operations $ .45 $ .47 $ .55 $ (.10) $ 1.38 - ----------------------------------------------------------------------------------------------------------------------------- Discontinued operations (.01) (.01) (.01) (.02) (.05) - ----------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ .44 $ .46 $ .54 $ (.12) $ 1.33 - -----------------------------------------------------------------------------------------------------------------------------
FISCAL 1993
(In millions except per share amounts) Quarter First Second Third Fourth Year - ----------------------------------------------------------------------------------------------------------------------------- Net sales $416.8 $441.2 $439.9 $498.4 $1,796.3 - ----------------------------------------------------------------------------------------------------------------------------- Gross margins 190.8 203.3 196.5 235.1 825.7 - ----------------------------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations 27.6 28.0 30.5 (199.9) (113.8) - ----------------------------------------------------------------------------------------------------------------------------- Discontinued operations (.5) (1.5) (.9) (3.1) (6.0) - ----------------------------------------------------------------------------------------------------------------------------- Cumulative effects of accounting changes (80.6) (80.6) - ----------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) (53.5) 26.5 29.6 (203.0) (200.4) - ----------------------------------------------------------------------------------------------------------------------------- Preferred stock dividends (.1) (.1) (.1) (.1) (.4) - ----------------------------------------------------------------------------------------------------------------------------- Available for common shareholders $ (53.6) $ 26.4 $ 29.5 $(203.1) $ (200.8) - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Continuing operations $ .36 $ .36 $ .39 $ (2.59) $ (1.48) - ----------------------------------------------------------------------------------------------------------------------------- Discontinued operations (.01) (.02) (.01) (.04) (.08) - ----------------------------------------------------------------------------------------------------------------------------- Accounting changes (1.04) (1.04) - ----------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ (.69) $ .34 $ .38 $ (2.63) $ (2.60) - ----------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------
FISCAL 1994 Earnings from continuing operations included favorable tax adjustments of $1.4 million, or $.02 per share and $1.6 million, or $.02 per share, in the first and third quarters, respectively, from recently enacted U.S. and foreign tax law changes. Fourth quarter earnings from continuing operations included after-tax restructuring charges of $58.8 million, or $.76 per share. Earnings from continuing operations without restructuring charges and favorable tax adjustments were:
- -------------------------------------------------------------------------------------------------------------- Quarter First Second Third Fourth Year - -------------------------------------------------------------------------------------------------------------- Net of taxes $33.9 $36.7 $41.3 $51.3 $163.2 - -------------------------------------------------------------------------------------------------------------- Per share $.43 $.47 $.53 $.66 $2.10 - -------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------
Earnings per share for the four quarters of 1994 are less than full year per share results by $.01 from an increase in common shares outstanding. FISCAL 1993 Second quarter earnings from continuing operations included an after-tax charge of $3.4 million, or $.04 per share, from executive resignations resulting from the performance of Mallinckrodt Veterinary. Fourth quarter continuing operations included after-tax charges of $242.2 million, or $3.13 per share. The net after-tax charges for FAS 106,FAS 109 and FAS 112 on continuing operations were:
- -------------------------------------------------------------------------------------------------------------- Quarter First Second Third Fourth Year - -------------------------------------------------------------------------------------------------------------- Net of taxes $1.0 $1.1 $0.5 $1.2 $3.8 - -------------------------------------------------------------------------------------------------------------- Per share $.01 $.01 $.01 $.02 $.05 - -------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------
50 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information concerning directors of the Registrant, see pages 3 through 14, incorporated herein by reference, of Mallinckrodt's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on October 19, 1994. Information concerning executive officers of the Registrant is included in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION For information concerning management remuneration, see pages 21 through 35, incorporated herein by reference, of Mallinckrodt's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on October 19, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT For information concerning security ownership of certain beneficial owners and management, see pages 11 and 12, incorporated herein by reference, of Mallinckrodt's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on October 19, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS For information concerning certain relationships and related transactions (including section 16(a) filings certain of which were not made on a timely basis), see pages 9 through 11 and pages 13 and 14, incorporated herein by reference, of Mallinckrodt's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on October 19, 1994. 51 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits (1) (2) See index on page 65 for a listing of financial statements and financial statement schedules filed with this report. (3) Exhibits filed with this report. Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 3.1 Restated Certificate of X Incorporation of Mallinckrodt, dated June 22, 1994. 3.2 By-Laws of Mallinckrodt as amended Exhibit 3.3 through April 18, 1990. to 1990 10-K. 4.1 Form 8-A Registration Exhibit 4.6 Statement under Section 12 to 1989 10-K. of the Securities Exchange Act of 1934, dated April 10, 1987 defining the rights of holders of Mallinckrodt's 4% Cumulative Preferred Stock and Common Stock. 4.2 Amended and restated common Exhibit 4(b) to stock purchase rights agreement Form 8-K dated dated March 10, 1989. March 10, 1989. 52 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 4.3 Second amendment to the common Exhibit 6 to stock purchase rights agreement Form 8 dated dated April 17, 1991. April 18, 1991. 4.4(a) Indenture dated as of March 15, Exhibit 4 1985, between Mallinckrodt and to Form S-3 Morgan Guaranty Trust Company Registration of New York pursuant to which Statement $150 million 9-7/8% Sinking No. 2-96566. Fund Debentures due March 15, 2011 were issued. 4.4(b) First Supplemental Indenture dated Exhibit 4.2 as of April 1, 1992 between to Form S-3 Mallinckrodt and Morgan Guaranty Registration Trust Company of New York pursuant Statement No. to which $100 million 6% Notes due 33-47081 October 15, 2003, and $100 million 7% Debentures due December 15, 2013 were issued. 4.5 Form 8-A Registration Statement X under Section 12 of the Securities Exchange Act of 1934, dated May 6, 1994 regarding $100 million 6% Notes due October 15, 2003, and $100 million 7% Debentures due December 15, 2013. 10.1(a) Contingent Employment Agreement Exhibit 10.1(c) with C. Ray Holman dated to 1991 10-K. April 1, 1987.(1) 10.1(b) Contingent Employment Agreement Exhibit 10.1(b) with William J. Mercer dated to 1993 10-K. March 9, 1990.(1) 10.1(c) Contingent Employment Agreement Exhibit 10.1(c) with Robert G. Moussa dated to 1993 10-K. April 19, 1990.(1) 53 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.1(d) Contingent Employment Agreement Exhibit 10.1(f) with Mack G. Nichols dated to 1991 10-K. April 1,1987.(1) 10.1(e) Contingent Employment Agreement X with Beverley L. Hayes dated March 7, 1990.(1) 10.2 Mallinckrodt Executive Life Exhibit 10.2 Insurance Program adopted to 1989 10-K. May 20, 1987.(1) 10.3 Restated Mallinckrodt Executive Exhibit 10.3 Long-Term Disability Plan to 1989 10-K. effective January 1, 1987.(1) 10.4(a) Agreement with Exhibit 10.4(a) George D. Kennedy dated to 1991 10-K. December 17, 1990.(1) 10.4(b) Amendment dated June 16, 1993 Exhibit 10.4(b) to Agreement with George to 1993 10-K. D. Kennedy dated December 17, 1990 described in Exhibit 10.4(a).(1) 10.5(a) Supplemental Benefit Plan for Exhibit 10.6(a) Participants in the Mallinckrodt to 1989 10-K. Retirement Plan as amended and restated effective January 1, 1980.(1) 54 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.5(b) Amendment No. 1 dated June 20, Exhibit 10.6(b) 1989 to Supplemental Benefit to 1989 10-K. Plan for Participants in the Retirement Plan for Salaried Employees of Mallinckrodt.(1) 10.5(c) Amendment No. 2 dated April 20, Exhibit 10.6(c) 1990 to Supplemental Benefit to 1990 10-K. Plan for Participants in the Mallinckrodt Retirement Plan.(1) 10.6(a) Mallinckrodt Supplemental Executive Exhibit 10.7(a) Retirement Plan restated to 1989 10-K. effective April 19, 1988.(1) 10.6(b) Amendment No. 1 effective Exhibit 10.7(c) December 6, 1989, to to 1990 10-K. Supplemental Executive Retirement Plan.(1) 10.7(a)(i) Gross-Up Agreement with Exhibit 10.7(a) C. Ray Holman dated to 1993 10-K. July 1, 1992 and Amendment dated April 30, 1993.(1) 10.7(a)(ii) Amendment No. 2 to Gross-Up X Agreement with C. Ray Holman dated September 1, 1993.(1) 55 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.7(b)(i) Gross-Up Agreement with Exhibit 10.7(b) William J. Mercer dated to 1993 10-K. July 1, 1992 and Amendment dated April 30, 1993.(1) 10.7(b)(ii) Amendment No. 2 to Gross-Up X Agreement with William J. Mercer dated September 1, 1993.(1) 10.7(c)(i) Gross-Up Agreement with Exhibit 10.7(c) Robert G. Moussa dated to 1993 10-K. April 22, 1993.(1) 10.7(c)(ii) Amendment No. 2 to Gross-Up X Agreement with Robert G. Moussa dated September 1,1993.(1) 10.7(d)(i) Gross-Up Agreement with Exhibit 10.7(d) Mack G. Nichols dated to 1993 10-K. July 1, 1992.(1) 10.7(d)(ii) Amendment No. 2 to Gross-Up X Agreement with Mack G. Nichols dated September 1, 1993.(1) 56 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.7(e) Gross-Up Agreement with X Beverley L. Hayes dated July 1, 1992 and Amendment dated September 1, 1993.(1) 10.8 Mallinckrodt Management Incentive Exhibit 10.9(b) Compensation Program as to 1991 10-K. amended and restated effective July 1, 1991.(1) 10.9(a) Mallinckrodt 1973 Stock Option Post-Effective and Award Plan as amended Amendment effective February 21, 1990.(1) No. 1 to Form S-8 Registration Statement No. 33-32109. 10.9(b) Amendment No. 1 to the Mallinckrodt Form S-8 1973 Stock Option and Award Registration Plan dated June 19, 1991.(1) Statement No. 33-43925 10.10 Mallinckrodt Directors Retirement Exhibit 10.10 Services Plan as amended and to 1993 10-K. restated effective April 21, 1993.(1) 10.11(a) Mallinckrodt 1981 Stock Option Post-Effective Plan as amended through Amendment No. 3 April 19, 1988.(1) to Form S-8 Registration Statement No. 2-80553. 57 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.11(b) Amendment to the 1981 Exhibit 10.12(b) Stock Option Plan effective to 1989 10-K. February 15, 1989.(1) 10.11(c) Amendment to the 1981 Exhibit 10.12(c) Stock Option Plan effective to 1991 10-K. June 19, 1991.(1) 10.12(a) Intercorporate Agreement dated Exhibit 10.1 to as of July 1, 1987 by and IMC Fertilizer between Mallinckrodt and IMC Group, Inc.'s Fertilizer Group, Inc. with Form S-1 Exhibits, including the Registration Restated Certificate of Statement Incorporation of IMC Fertilizer No. 33-17091. Group, Inc., as amended; By-Laws of IMC Fertilizer Group, Inc.; Preliminary Agreement for K-2 Advances; Registration Rights Agreement; Services Agreement; Management Services Agreement; Agreement regarding Pollution Control and Industrial Revenue Bonds; License Agreement; office lease and sublease; management agreements; supply agreements; and transportation service agreements. 10.13(a) Note Agreement with The Exhibit 10.13(a) Prudential Insurance Company to 1992 10-K. of America dated as of February 1, 1980. 58 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.13(b) Agreement dated June 3, 1981, Exhibit 10.14(b) consolidating obligation in to 1990 10-K. Loan Agreement dated April 18, 1973, under Note Agreement dated as of February 1, 1980. 10.13(c) Amendment dated June 15, Exhibit 10.14(d) 1989, to Note Agreement to 1989 10-K. with Prudential Insurance Company of America dated as of February 1, 1980. 10.13(d) Amendment dated April 18, 1991 Exhibit 10.14(e) to Note Agreement with to 1991 10-K. Prudential Insurance Company of America dated as of February 1, 1980 as amended. 10.13(e) Amendment dated June 2, 1992 Exhibit 10.13(c) to Note Agreement with to 1992 10-K. Prudential Insurance Company of America dated as of February 1, 1980 as amended. 10.13(f) Amendment dated July 20, 1993 Exhibit 10.13(f) to Note Agreement with to 1993 10-K. Prudential Insurance Company of America dated as of February 1, 1980 as amended. 10.14 Management Compensation and Exhibit 10.30 Benefit Assurance Program.(1) to 1988 10-K. 59 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.15 Form of Trust Agreement dated Exhibit 10.31 June 7, 1988, between Mallinckrodt to 1988 10-K. and Wachovia Bank & Trust of North Carolina, N.A., incident to the program in Exhibit 10.15, for Mallinckrodt's 1973 Stock Option and Award Plan, 1981 Stock Option Plan, Long-Term Performance Incentive Plan, Supplemental Executive Retirement Plan, Contingent Employment Agreements, Gross-Up of Excise Tax Agreement, and Management Incentive Compensation Plan.(1) 10.16(a) Letter of Credit Agreement Exhibit 10.32 dated May 31, 1988, between to 1988 10-K. Mallinckrodt and a group of banks providing the means of funding the trusts described in Exhibit 10.15.(1) 10.16(b) Amendment and Assumption Exhibit 10.17(c) Agreements to the Letter of to 1991 10-K. Credit Agreement described in Exhibit 10.16(a) dated June 22, 1991.(1) 10.17(a) Corporate Staff Employee Exhibit 10.33 Severance and Benefit to 1988 10-K. Assurance Policy.(1) 60 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.17(b) Form of letter sent to Exhibit 10.18(b) participants in Mallinckrodt's to 1989 10-K. Corporate Staff Employee Severance and Benefit Assurance Program.(1) 10.18 Supplemental Life Plan Exhibit 10.20 of Mallinckrodt, Inc. to 1989 10-K. effective July 15, 1984.(1) 10.19(a) Employment Agreement dated Exhibit 10.19(a) February 17, 1993 to 1993 10-K. with C. Ray Holman.(1) 10.19(b) Employment Agreement dated Exhibit 10.19(b) February 17, 1993 to 1993 10-K. with William J. Mercer.(1) 10.19(c) Employment Agreement dated Exhibit 10.19(c) February 17, 1993 with to 1993 10-K. Robert G. Moussa.(1) 10.19(d) Employment Agreement dated Exhibit 10.19(d) February 17, 1993 with to 1993 10-K. Mack G. Nichols.(1) 10.21 Mallinckrodt Directors' Stock Exhibit 4(a) Option Plan effective to Form S-8 October 17, 1990.(1) Registration Statement No. 33-40246. 61 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.22 Mallinckrodt Long-Term Incentive Exhibit 10.24 Plan for Senior Management to 1991 10-K. effective July 1, 1991.(1) 10.23 Mallinckrodt Long-Term Incentive Exhibit 10.25 Plan for Key Middle Managers to 1991 10-K. effective June 18, 1991.(1) 10.24 Consultancy Agreement X with Herve M. Pinet for the period December 1, 1993, to November 30, 1994. 10.25(a) Consulting Agreement with Exhibit 10.27 Ronald G. Evens, M.D., for to Amendment the period from January 1, 1987, No. 1 to through December 31, 1989; 1992 10-K. extended for the calendar years 1990, 1991 and 1992.(1) 62 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 10.25(b) Amendment dated December 17, 1992 Exhibit 10.26(b) to Consulting Agreement with to 1993 10-K. Ronald G. Evens, M.D., described in Exhibit 10.26(a).(1) 10.26 Credit Agreement dated Exhibit 10.27 August 13, 1993, between to 1993 10-K. Mallinckrodt and The Chase Manhattan Bank, individually and as an agent for the banks, ($350 million facility). 10.27 Credit Agreement dated Exhibit 10.28 August 13, 1993 between to 1993 10-K. Mallinckrodt and The Chase Manhattan Bank, individually and as an agent for the banks, ($100 million facility). 10.28 Offering Memorandum by Exhibit 10.29 J.P. Morgan for sale of to 1993 10-K. the commercial paper (CP) notes of Mallinckrodt. The CP program is backed by credit agreements included at 10.27 and 10.28. 10.29 Deferral Election Plan for X Non-Employee Directors, effective June 30, 1994.(1) 10.30 Long-Term Incentive Compensation X Plan, effective July 1, 1994.(1) 63 Incorporated Filed with Exhibit Herein by Electronic Number Description Reference to Submission - -------------------------------------------------------------------------------- 11.1 Primary earnings per share X computation for the three years ended June 30, 1994. 11.2 Fully diluted earnings X per share computation for the three years ended June 30, 1994. 21 Subsidiaries of the Registrant. X 23.1 Consent of Ernst & Young LLP. X 27 Financial data schedule for the X year ended June 30, 1994. (1) Management contract or compensatory plan required to be filed pursuant to Item 601 of Regulation S-K. (b) Reports on Form 8-K During the quarter and through the date of this report, the following reports on Form 8-K were filed. - Report dated June 15, 1994, under Item 5 regarding restructuring program. - Report dated July 21, 1994, under Item 5 regarding the resignation of the President of Mallinckrodt Veterinary, Inc. - Report dated August 25, 1994, under Item 5 regarding repurchase of Company stock. - Report dated September 7, 1994, under Item 5 regarding Mallinckrodt Medical's decision to relocate tracheal tube manufacturing operations. 64 INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA, AND FINANCIAL STATEMENT SCHEDULES Page References --------------- Consolidated Balance Sheet at June 30, 1994 and 1993 . . . . . . . . . . . 37 For the years ended June 30, 1994, 1993 and 1992: Information by Business Segment . . . . . . . . . . . . . . . . . . . . . 35 Consolidated Statement of Operations. . . . . . . . . . . . . . . . . . . 36 Consolidated Statement of Cash Flows. . . . . . . . . . . . . . . . . . . 38 Consolidated Statement of Changes in Shareholders' Equity . . . . . . . . 39 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 40-49 Quarterly Results (Unaudited). . . . . . . . . . . . . . . . . . . . . . . 50 Consolidated financial statement schedules for years ended June 30, 1994, 1993 and 1992: II - Amounts receivable from related parties and underwriters, promoters and employees other than related parties . . . . . . . . . . . . . . . . . . . . . . . 69 V - Property, plant and equipment. . . . . . . . . . . . . . . . . . . 70-72 VI - Accumulated depreciation and amortization of property, plant and equipment . . . . . . . . . . . . . . . . . 73 IX - Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . 74 X - Supplementary income statement information . . . . . . . . . . . . 75 ___________________ All other schedules are omitted as the required information is not present in sufficient amounts or the required information is included in the consolidated financial statements or notes thereto. Financial statements and schedules and summarized financial information of 50 percent or less owned persons are omitted, as none of such persons are individually or in the aggregate significant under the tests specified in Regulation S-X under Article 3.09 of general instructions to the financial statements. 65 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Mallinckrodt Group Inc. - ----------------------- (Registrant) By: MICHAEL A. ROCCA By: WILLIAM B. STONE ------------------- -------------------- Michael A. Rocca William B. Stone Senior Vice President and Vice President and Controller Chief Financial Officer Date: September 23, 1994 66 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date - --------------------- ------------------- ---------------------- C. RAY HOLMAN - --------------------- C. Ray Holman President, Chief September 23, 1994 Executive Officer and Director MICHAEL A. ROCCA - --------------------- Michael A. Rocca Senior Vice President September 23, 1994 and Chief Financial Officer WILLIAM B. STONE - --------------------- William B. Stone Vice President and September 23, 1994 Controller (Chief Accounting Officer) RAYMOND F. BENTELE - --------------------- Raymond F. Bentele Director September 23, 1994 RONALD G. EVENS - --------------------- Ronald G. Evens Director September 23, 1994 LOUIS FERNANDEZ - --------------------- Louis Fernandez Director September 23, 1994 67 Signature Title Date - ---------------------- ----------------- ---------------------- ALEC FLAMM - ---------------------- Alec Flamm Director September 23, 1994 ROBERTA S. KARMEL - ---------------------- Roberta S. Karmel Director September 23, 1994 GEORGE D. KENNEDY - ---------------------- George D. Kennedy Director September 23, 1994 CLAUDINE B. MALONE - ---------------------- Claudine B. Malone Director September 23, 1994 MORTON MOSKIN - ---------------------- Morton Moskin Director September 23, 1994 HERVE M. PINET - ---------------------- Herve M. Pinet Director September 23, 1994 BRIAN M. RUSHTON - ---------------------- Brian M. Rushton Director September 23, 1994 DANIEL R. TOLL - ---------------------- Daniel R. Toll Director September 23, 1994 68 Schedule II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES Years Ended June 30, 1992, 1993 and 1994 ($ in thousands)
Balance at End Deductions of Period Balance at ---------- ------------------- Beginning Amounts Non Name of Debtor of Period Additions Collected Current Current - --------------------------------------------------------------------------------------------------- 1992 U.S. Employee relocation loans (A) $1,252 $412 $911 $408 $345 Number of loans 31 18 30 18 1 U.K. employee relocation loans (A) 1,231 156 823 564 Number of loans 9 7 3 13 - --------------------------------------------------------------------------------------------------- 1993 U.S. Employee relocation loans (A) $753 $960 $416 $757 $540 Number of loans 19 17 20 14 2 U.K. employee relocation loans (A) 564 18 402 180 Number of loans 13 1 3 11 - --------------------------------------------------------------------------------------------------- 1994 U.S. Employee relocation loans (A) $1,297 $1,806 $798 $2,055 $250 Number of loans 16 27 18 23 2 U.K. employee relocation loans (A) 180 63 72 171 Number of loans 11 2 3 10 - --------------------------------------------------------------------------------------------------- (A) Generally non-interest bearing and repayable upon the sale of the employee's former residence.
69 Schedule V (Page 1 of 3) PROPERTY, PLANT AND EQUIPMENT Years Ended June 30, 1992, 1993 and 1994 ($ in millions)
Balance Other Balance at Beginning of Additions Changes at End of Period at Cost Retirements Add (Deduct) Period - ------------------------------------------------------------------------------------------------------- 1992 Land $64.1 $1.0 $.6 $(1.8) (A) 1.1 (C) (.8) (E) $63.0 Building and leasehold improvements 229.8 13.8 4.5 6.6 (A) .1 (B) 6.3 (C) (13.1) (E) 239.0 Machinery and equipment 591.0 76.8 22.3 5.9 (A) 1.0 (B) 8.8 (C) (17.9) (E) 643.3 Construction in progress 59.6 58.8 (10.6) (A) .1 (B) 4.2 (C) (2.8) (E) 109.3 - ------------------------------------------------------------------------------------------------------- $944.5 $150.4 $27.4 $(12.9) $1,054.6 - -------------------------------------------------------------------------------------------------------
See explanation of notes on page 3 of 3. 70 Schedule V (Page 2 of 3) PROPERTY, PLANT AND EQUIPMENT Years Ended June 30, 1992, 1993 and 1994 ($ in millions)
Balance Other Balance at Beginning of Additions Changes at End of Period at Cost Retirements Add (Deduct) Period - ------------------------------------------------------------------------------------------------------- 1993 Land $63.0 $4.1 $.2 $3.1 (A) .1 (B) (2.6) (C) $67.5 Building and leasehold improvements 239.0 31.1 2.3 11.1 (A) 2.2 (B) (11.0) (C) 270.1 Machinery and equipment 643.3 76.0 39.3 17.1 (A) 13.6 (B) (15.1) (C) (.1) (F) 695.5 Construction in progress 109.3 77.1 (19.2) (A) 1.2 (B) (7.3) (C) (1.3) (F) 159.8 - ------------------------------------------------------------------------------------------------------- $1,054.6 $188.3 $41.8 $(8.2) $1,192.9 - -------------------------------------------------------------------------------------------------------
See explanation of notes on page 3 of 3 71 Schedule V (Page 3 of 3) PROPERTY, PLANT AND EQUIPMENT Years Ended June 30, 1992, 1993 and 1994 ($ in millions)
Balance Other Balance at Beginning of Additions Changes at End of Period at Cost Retirements Add (Deduct) Period - ---------------------------------------------------------------------------------------------------------------- 1994 Land $67.5 $4.6 $.1 $(3.2) (A) 1.1 (B) .6 (C) (1.2) (G) $69.3 Building and leasehold 270.1 49.7 2.7 30.4 (A) improvements 5.7 (B) (.3) (C) 352.9 Machinery & Equipment 695.5 117.4 23.1 22.2 (A) 51.2 (B) 9.2 (C) 872.4 Construction in progress 159.8 .6 (51.4) (A) 1.2 (B) 2.2 (C) (11.0) (G) 101.4 - ------------------------------------------------------------------------------------------------------- $1,192.9 $172.3 $25.9 $56.7 $1,396.0 - ------------------------------------------------------------------------------------------------------- Notes for Schedule V (A) Transfers between accounts and reclassifications from other balance sheet accounts. (B) Purchases of businesses. (C) Foreign currency adjustment. (E) Reclassification for Tastemaker joint venture. (F) Write-offs related to 1993 restructuring charges. (G) Reclassification among accounts.
72 Schedule VI ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT Years Ended June 30, 1992, 1993 and 1994 ($ in millions)
Additions Balance Charged to Other Balance at Beginning of Cost and Changes at End of Period Expenses Retirements Add(Deduct) Period - ------------------------------------------------------------------------------------------------------- 1992 Building and leasehold improvements $55.8 $11.6 $2.6 $.9 (B) (2.4) (C) .9 (E) $64.2 Machinery and equipment 258.5 58.8 15.7 3.5 (B) (7.0) (C) .2 (E) 298.3 - ------------------------------------------------------------------------------------------------------- $314.3 $70.4 $18.3 $(3.9) $362.5 - ------------------------------------------------------------------------------------------------------- 1993 Building and leasehold improvements $64.2 $12.8 $1.9 $(1.5) (B) 26.6 (D) 4.9 (E) $105.1 Machinery and equipment 298.3 61.9 23.9 (5.7) (B) 58.2 (D) .1 (E) 388.9 - ------------------------------------------------------------------------------------------------------- $362.5 $74.7 $25.8 $82.6 $494.0 - ------------------------------------------------------------------------------------------------------- 1994 Building and leasehold improvements $105.1 $15.1 $1.5 $(1.2) (A) 1.7 (B) (1.2) (E) $118.0 Machinery and equipment 388.9 64.3 22.4 (8.5) (A) 3.5 (B) (11.0) (E) 414.8 - ------------------------------------------------------------------------------------------------------- $494.0 $79.4 $23.9 $(16.7) $532.8 - ------------------------------------------------------------------------------------------------------- Notes (A) Transfers between accounts and reclassifications from other balance sheet accounts. (B) Foreign currency adjustment. (C) Reclassification for Tastemaker joint venture. (D) Write-off related to 1993 restructuring charges. (E) Reclassification among accounts.
73 Schedule IX SHORT-TERM BORROWINGS Years Ended June 30, 1994, 1993 and 1992 ($ in millions)
Maximum Average Weighted Amount Amount Average Out- Out- Interest Balance Weighted standing standing Rate at End Average During During During of Interest the the the Period Rate Period Period Period - ------------------------------------------------------------------------------------------------------ Notes payable to banks (A) 1994 $ 55.0 6.5% $ 89.0 $ 68.7 6.7% 1993 $ 84.2 6.3% $145.8 $106.4 5.1% 1992 $ 96.2 8.3% $ 96.2 $ 76.5 10.5% Commercial paper (B) 1994 $172.5 3.9% $308.3 $211.6 3.9% 1993 $280.5 3.4% $331.6 $161.7 3.4% The average amount outstanding for each period was computed by averaging the daily balances during the year. The weighted average interest rate for each period was computed by dividing interest on short-term borrowings by the average amount outstanding during the year. (A) Primarily foreign banks. (B) No commercial paper was issued in 1992. Amounts for 1994 and 1993 include commercial paper borrowings aggregating $100.0 million and $190.0, respectively, which have been classified as long-term debt as it is backed by long-term lines of credit.
74 Schedule X SUPPLEMENTARY INCOME STATEMENT INFORMATION Years Ended June 30, 1994, 1993, and 1992 ($ in millions)
Charged to Costs and Expenses ----------------------------- 1994 1993 1992 - ---------------------------------------------------------------------------------------- Maintenance and repairs $56.6 $44.6 $41.2 ------ ------ ------ ------ ------ ------ Amortization of intangible assets $25.1 $21.4 $18.9 ------ ------ ------ ------ ------ ------ Taxes, other than payroll and income taxes $26.3 $24.3 $24.4 ------ ------ ------ ------ ------ ------ Advertising $35.1 $41.7 $42.2 ------ ------ ------ ------ ------ ------ Royalties $20.4 $13.9 $11.2 ------ ------ ------ ------ ------ ------
75 EX-3.1 2 CERT. OF INCORP. Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF MALLINCKRODT GROUP INC. _______ UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW Pursuant to Section 807 of the Business Corporation Law, the undersigned hereby certify: I. That the name of the corporation is Mallinckrodt Group Inc. and the name under which it was formed is International Agricultural Corporation. II. That the Certificate of Incorporation of the corporation (under the name of International Agricultural Corporation) was originally filed under the Business Corporation Law of the State of New York by the Department of State, Albany, New York on the 14th day of June, 1909. III. That Article Fourth of the Certificate of Incorporation of Mallinckrodt Group Inc. is hereby amended to change the address to which the secretary of state shall mail a copy of any process against the corporation served upon him. IV. That the above-described amendment to the Certificate of Incorporation was authorized by vote of the board of directors of the corporation without a vote of the shareholders, as authorized by Section 803(b)(2) of the Business Corporation Law. V. That the text of the Certificate of Incorporation of said Mallinckrodt Group Inc. is hereby restated as amended to read as herein set forth in full: CERTIFICATE OF INCORPORATION of Mallinckrodt Group Inc. We, the undersigned, all being persons of full age and at least two-thirds being citizens of the United States and at least one of us a resident of the State of New York, desiring to form a stock corporation pursuant to the Business Corporation Law of the State of New York, do hereby make, sign, acknowledge and file this certificate for that purpose, as follows: FIRST: The name of the corporation is Mallinckrodt Group Inc. SECOND: The purposes of the Corporation are as follows: 1. To manufacture, mine, extract, process, construct, develop, assemble, and produce in any way, to sell, lease, supply, export, import, and store, transport, distribute, market or dispose of in any way, to purchase, lease, and acquire in any way, to own, operate, experiment with, deal or trade in, finance, provide services for or in respect of, and use in any way minerals, metals, chemicals, fertilizers, foods, beverages, timber and other forestry products, energy sources, materials, equipment, apparatus, appliances, devices, structures, facilities, processes, information, tangible and intangible property, services and systems of every kind, nature and description, in any part of the world for any application or purpose whatsoever, including but not limited to industrial, mining, agricultural, consumer, defense, governmental, scientific, educational, cultural, financial, recreational, transportation, construction, publication, and communication applications or purposes. 2. To conduct studies and research and development, and to engage in any other activity relating to the development, application and dissemination of information concerning science, technology, and other fields of endeavor. 3. To acquire by purchase, lease, subscription or otherwise all or any part of any interest in the property, good will, business, franchises or assets of any corporation, association, firm or individual and undertake either wholly or in part the liabilities of any corporation, association, firm or individual and to take up any business as a going concern or otherwise (a) by purchase of the assets thereof wholly or in part; (b) by acquisition of the capital stock or any part thereof; or (c) in any other manner, and to pay for the same in cash or in the stock or bonds of the Corporation or otherwise; to hold, maintain and operate, or in any manner deal in or dispose of the whole or any part of any interest in the property, good will, business, franchises, or assets so acquired, and to conduct in any lawful manner the whole or any part of any business so acquired; and without limiting the generality of the foregoing, to apply for, acquire, hold and operate under or to dispose of, mining and prospecting permits or leases from any government anywhere in the world or from any department or authority of any thereof. 4. To do any and all of the things herein set forth to the same extent as natural persons might or could do and in any part of the world, as principals, agents, contractors, or otherwise; and in general, to engage in any part of the world, directly or indirectly, in any activity which may promote the interests of the Corporation, or enhance the value of its property to the fullest extent permitted by applicable law, and in furtherance of the foregoing purposes, to exercise all powers now or hereafter granted or permitted by applicable law, including the powers specified in the New York Business Corporation Law. The foregoing clauses shall be construed as objects and powers as well as purposes, and it is hereby expressly provided that enumeration herein of specific purposes, objects and powers shall not be held to limit or restrict in any way the general powers of the Corporation. THIRD: The aggregate number of shares which the Corporation shall have authority to issue is 301,500,000 divided into 100,000 shares of 4% Cumulative Preferred Stock of the par value of $100 per share (hereinafter called "Preferred Stock"), 1,400,000 shares of Series Preferred Stock of the par value of $1 per share (hereinafter called "Series Preferred Stock") and 300,000,000 shares of Common Stock of the par value of $1 per share (hereinafter called "Common Stock"). All of such shares shall be issued as full-paid and non-assessable shares, and the holders thereof shall not be liable for any further payments in respect thereto. The Series Preferred Stock shall rank subordinate to the Preferred Stock in respect of the payment of dividends and on any distribution upon dissolution, liquidation or winding up of the Corporation, and in respect of the rights of the Preferred Stock. A statement of the designations, preferences, privileges and voting powers of the shares of each class and the restrictions and qualifications thereof shall be as follows: -2- (a) PREFERRED STOCK 1. DIVIDENDS: The holders of the Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of the assets or funds of the Corporation legally available therefor, dividends at the fixed rate of four percent (4%) per annum and no more, payable quarterly on the thirtieth day of March, June, September and December of each year (the periods between such dates, commencing on such dates, being herein designated as "dividend periods"). Dividends on the Preferred Stock shall be cumulative from and after the first day of April, 1942. Such dividends on the Preferred Stock shall be declared and paid or set apart for payment before any dividends shall be declared or paid or set apart for payment on the Series Preferred Stock or the Common Stock and shall be cumulative as above provided, so that if in any quarterly dividend period dividends at the rate of four percent (4%) per annum shall not have been declared and paid or set apart for payment on all outstanding shares of Preferred Stock for such quarterly dividend period and all preceding quarterly dividend periods from and after the first day of the quarterly dividend period from which dividends are cumulative, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before any dividends shall be declared or paid or set apart for payment on the Series Preferred Stock or the Common Stock. After full cumulative dividends on all shares of Preferred Stock outstanding shall have been declared and paid or set apart for payment for all previous dividend periods and for the current quarterly dividend period, as above provided, then, and not otherwise so long as any shares of the Preferred Stock shall remain outstanding, dividends may be declared and paid or set apart for payment on the Series Preferred Stock and the Common Stock out of the assets or funds of the Corporation legally available therefor. 2. VOTING RIGHTS: The holders of the Preferred Stock shall be entitled to one vote for each share held. So long as the Preferred Stock shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of at least two-thirds (2/3) thereof, amend the Certificate of Incorporation of the Corporation in such manner as to alter or change the preferences, special rights or powers of the Preferred Stock so as to affect such class of stock adversely, or to increase or decrease the amount of the authorized stock of such class or to increase or decrease the par value thereof. At any time when six (6) quarterly dividends on such Preferred Stock shall be in default, the holders of the Preferred Stock at such time or times outstanding shall be entitled, at the next annual meeting of stockholders for the election of directors, and until payment in full of all such dividends then in default, or provision therefor by the declaration and setting aside thereof, voting as a class, to the exclusion of the holders of the Common Stock and the holders of the Series Preferred Stock to vote for and elect two members of the Board of Directors of the Corporation; and, subject to any voting rights with respect to any series of Series Preferred Stock, the holders of the Common Stock, voting as a class, to the exclusion of the holders of Preferred Stock, shall be entitled to vote for and elect the balance of the Board of Directors. Directors elected by any class of stock voting separately as a class, may be removed only by a majority vote of such class, voting separately as a class, so long as the voting power of such class shall continue. 3. LIQUIDATION: The holders of the Preferred Stock, upon any dissolution, liquidation or winding up of the Corporation, will be entitled to receive, out of the assets and funds of the Corporation, whether from capital or surplus, if such dissolution, liquidation or winding up be voluntary, $110 per share, or if such dissolution, liquidation or winding up be involuntary, $100 per share, in either case with an amount equal to all accrued and unpaid dividends, before any distribution is made to the holders of Series Preferred Stock or the Common Stock. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to permit the payment in full of the amounts payable as aforesaid to the holders of the Preferred Stock, then, to the exclusion of the holders of the Series Preferred Stock and the holders of the Common Stock, the holders of the Preferred Stock shall share ratably, in proportion to the amounts which they are respectively entitled to receive in such event, in the distribution of assets, according to the number of shares of Preferred Stock which they respectively hold. -3- 4. REDEMPTION: The Preferred Stock shall be subject to redemption in whole or in part at any time and from time to time at the option of the Corporation upon payment of $110 per share and in addition thereto a sum equal to all accrued and unpaid dividends thereon to the date fixed for redemption, provided, however, that a notice specifying the shares to be redeemed, and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be published once in a daily newspaper printed in the English language and published and of general circulation in the Borough of Manhattan, the City of New York, and shall be mailed, addressed to the holders of record of the Preferred Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not less than thirty (30) days previous to the date fixed for redemption. If less than the whole amount of outstanding Preferred Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders of said Preferred Stock as stockholders of the Corporation, except the right to receive the redemption price upon surrender of the certificates representing the Preferred Stock so called for redemption, duly endorsed for transfer, if required, shall cease and determine. With respect to any shares of Preferred Stock so called for redemption, if, before the redemption date, the Corporation shall deposit with a bank or trust company in the Borough of Manhattan, City of New York, having a capital and surplus of at least $5,000,000 funds necessary for such redemption, in trust, to be applied to the redemption of the shares of Preferred Stock so called for redemption, then from and after the date of such deposit, all rights of the holders of such shares of Preferred Stock, so called for redemption, shall cease and determine, except the right to receive, on and after the redemption date, the redemption price upon surrender of the certificates representing such shares of Preferred Stock, so called for redemption, duly endorsed for transfer, if required. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six (6) years from such redemption date shall be released or repaid to the Corporation, after which the holders of such shares of Preferred Stock so called for redemption shall look only to the Corporation for payment of the redemption price. (b) SERIES PREFERRED STOCK 1. BOARD AUTHORITY: The Series Preferred Stock may be issued from time to time by the Board of Directors as herein provided in one or more series. The designations, relative rights, preferences and limitations of the Series Preferred Stock, and particularly of the shares of each series thereof, may be similar to or may differ from those of any other series. The Board of Directors of the Corporation is hereby expressly granted authority, subject to the provisions of this ARTICLE THIRD, to issue from time to time Series Preferred Stock in one or more series and to fix from time to time before issuance thereof, by filing a certificate pursuant to the Business Corporation Law, the number of shares in each such series of such class and all designations, relative rights (including the right to convert into shares of any class or into shares of any series of any class), preferences and limitations of the shares in each such series, including but without limiting the generality of the foregoing, the following: (i) The number of shares to constitute such series (which number may at any time, or from time to time, be increased or decreased by the Board of Directors, notwithstanding that shares of the series may be outstanding at the time of such increase or decrease, unless the Board of Directors shall have otherwise provided in creating such series) and the distinctive designation thereof; (ii) The dividend rate on the shares of such series, and the date or dates, if any, from which dividends thereon shall be cumulative; (iii) Whether or not the shares of such series shall be redeemable, and, if redeemable, the date or dates upon or after which they shall be redeemable, the amount per share (which shall be, in the case of each share, not less than its preference upon involuntary liquidation, plus an amount equal to all -4- dividends thereon accrued and unpaid, whether or not earned or declared) payable thereon in the case of the redemption thereof, which amount may vary at different redemption dates; (iv) The right, if any, of holders of shares of such series to convert the same into, or exchange the same for Common Stock, and the terms and conditions of such conversion or exchange, as well as provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine; (v) The amount per share payable on the shares of such series upon the voluntary and involuntary liquidation, dissolution or winding up of the Corporation; (vi) Whether the holders of shares of such series shall have voting power, full or limited, in addition to the voting powers provided by law, and in case additional voting powers are accorded to fix the extent thereof; and (vii) Generally to fix the other rights and privileges and any qualifications, limitations or restrictions of such rights and privileges of such series, provided, however, that no such rights, privileges, qualifications, limitations or restrictions shall be in conflict with the Certificate of Incorporation of the Corporation or with the resolution or resolutions adopted by the Board of Directors, as hereinabove provided, providing for the issue of any series for which there are shares then outstanding. All shares of Series Preferred Stock of the same series shall be identical in all respects, except that shares of any one series issued at different times may differ as to dates, if any, from which dividends thereon may accumulate or accrue. All shares of Series Preferred Stock of all series shall be of equal rank and shall be identical in all respects except that to the extent not otherwise limited in this ARTICLE THIRD any series may differ from any other series with respect to any one or more of the designations, relative rights, preferences and limitations described or referred to in subparagraphs (i) to (vii) inclusive above. 2. DIVIDENDS: Dividends on the outstanding Series Preferred Stock of each series shall be declared and paid or set apart for payment before any dividends shall be declared and paid or set apart for payment on the Common Stock with respect to the same quarterly dividend period. Dividends on any shares of Series Preferred Stock shall be cumulative only if and to the extent set forth in a certificate filed pursuant to law. After dividends on all shares of Series Preferred Stock (including cumulative dividends if and to the extent any such shares shall be entitled thereto) shall have been declared and paid or set apart for payment with respect to any quarterly dividend period, and subject to the provisions of the Preferred Stock with respect to dividends as above provided, then and not otherwise so long as any shares of the Preferred Stock or Series Preferred Stock shall remain outstanding, dividends may be declared and paid or set apart for payment with respect to the same quarterly dividend period on the Common Stock out of the assets or funds of the Corporation legally available therefor. All shares of Series Preferred Stock of all series shall be of equal rank, preference and priority as to dividends irrespective of whether or not the rates of dividends to which the same shall be entitled shall be the same and when the stated dividends are not paid in full, the shares of all series of the Series Preferred Stock shall share ratably in the payment thereof in accordance with the sums which would be payable on such shares if all dividends were paid in full, provided, however, that any two or more series of the Series Preferred Stock may differ from each other as to the existence and extent of the right to cumulative dividends, as aforesaid. 3. VOTING RIGHTS: Except as otherwise specifically provided herein or in the certificate filed pursuant to law with respect to any series of the Series Preferred Stock, or as otherwise provided by law, the Series Preferred Stock shall not have any right to vote for the election of directors or for any other purpose and the Preferred Stock and the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes; provided, however, that at any time when six (6) quarterly dividends on any one or more series of Series Preferred Stock entitled to receive cumulative dividends shall be in default, the holders of all such cumulative series at the time or times outstanding as to which such default shall exist shall be entitled, at the -5- next annual meeting of stockholders for the election of directors, voting as a class, whether or not the holders thereof shall be entitled otherwise to vote by certificate filed pursuant to law, to the exclusion of the holders of Common Stock, Preferred Stock and any series of noncumulative Series Preferred Stock, to vote for and elect two (2) members of the Board of Directors of the Corporation, and provided, further, that at any time when six (6) quarterly dividends on any one or more series of noncumulative Series Preferred Stock shall be in default, the holders of all such noncumulative series at the time or times outstanding as to which such default shall exist shall be entitled, at the next annual meeting of stockholders for the election of directors, voting as a class, whether or not the holders thereof shall be entitled otherwise to vote by certificate filed pursuant to law, to the exclusion of the holders of Common Stock, Preferred Stock and any series of cumulative Series Preferred Stock, to vote for and elect two (2) members of the Board of Directors of the Corporation. All rights of all series of Series Preferred Stock to participate in the election of directors pursuant to this paragraph 3 shall continue in effect, in the case of all series thereof entitled to receive cumulative dividends, until cumulative dividends have been paid in full or set apart for payment on each cumulative series which shall have been entitled to vote at the previous annual meeting of stockholders, or in the case of all series of noncumulative Series Preferred Stock, until noncumulative dividends have been paid in full or set apart for payment for four consecutive quarterly dividend periods on each noncumulative series which shall have been entitled to vote at the previous annual meeting of stockholders. Directors elected by any class of stock, voting separately as a class, may be removed only by a majority vote of such class, voting separately as a class, so long as the voting power of such class shall continue. Subject to the voting rights of the Preferred Stock and the voting rights, if any, specifically provided in a certificate filed pursuant to law in respect of any series of Series Preferred Stock, the holders of the Common Stock, voting as a class, to the exclusion of the holders of such series so entitled to vote for and elect members of the Board pursuant to this paragraph 3, shall be entitled to vote for and elect the balance of the Board of Directors. Each stockholder entitled to vote at any particular time in accordance with the foregoing provisions shall not have more than one vote for each share of stock held of record by him and at the time entitled to voting rights. 4. LIQUIDATION: In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, each series of Series Preferred Stock shall have preference and priority over the Common Stock for payment of the amount to which each outstanding series of Series Preferred Stock shall be entitled in accordance with the provisions thereof and each holder of Series Preferred Stock shall be entitled to be paid in full such amounts, or have a sum sufficient for the payment in full set aside, before any payments shall be made to the holders of Common Stock, provided, however, that each holder entitled to receive any preferential amounts provided by certificate filed pursuant to law with respect to any series of the Series Preferred Stock shall not be entitled to receive for each share so held, if such liquidation, dissolution or winding up be voluntary, more than $55.00 per share, or if such liquidation, dissolution or winding up be involuntary, more than $50.00 per share plus in either case an amount equal to all dividends thereon accrued and unpaid. If, upon liquidation, dissolution or winding up of the Corporation, the assets of the Corporation or proceeds thereof, distributable among the holders of the shares of all series of the Series Preferred Stock, shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable if all amounts payable thereon were paid in full. After the payment to the holders of Series Preferred Stock of all such amounts to which they are entitled, as above provided, and subject to rights with respect to the Preferred Stock upon any such liquidation, dissolution or winding up as above provided, the remaining assets and funds of the Corporation shall be divided and paid to the holders of the Common Stock. 5. REDEMPTION: In the event that the Series Preferred Stock of any series shall be made redeemable as provided in clause (iii) of paragraph 1 of section (b) of this ARTICLE THIRD, the Corporation, at the option of the Board of Directors, may redeem at any time or times, and from time to time, all or any part of any one or more series of Series Preferred Stock outstanding upon notice duly given as hereinafter specified, by paying for each share the then applicable redemption price fixed by the Board of Directors (including an amount equal to accrued and unpaid dividends to the date fixed for redemption); provided, however, that a notice specifying the shares to be redeemed, and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be published -6- once in a daily newspaper printed in the English language and published and of general circulation in the Borough of Manhattan, The City of New York, and shall be mailed, addressed to the holders of record of the Series Preferred Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not less than thirty (30) days previous to the date fixed for redemption. If less than the whole amount of any outstanding series of Series Preferred Stock is to be redeemed, the shares of such series to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Series Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders of said Series Preferred Stock as stockholders in the Corporation, except the right to receive the redemption price upon surrender of the certificate representing the Series Preferred Stock so called for redemption, duly endorsed for transfer, if required, shall cease and determine. With respect to any shares of Series Preferred Stock so called for redemption, if, before the redemption date, the Corporation shall deposit with a bank or trust company in the Borough of Manhattan, The City of New York, having a capital and surplus of at least $5,000,000, funds necessary for such redemption, in trust, to be applied to the redemption of the shares of Series Preferred Stock so called for redemption, then from and after the date of such deposit, all rights of the holders of such shares of Series Preferred Stock so called for redemption shall cease and determine, except the right to receive, on and after the redemption date, the redemption price upon surrender of the certificates representing such shares of Series Preferred Stock so called for redemption, duly endorsed for transfer, if required. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six (6) years from such redemption date shall be released and repaid to the Corporation, after which the holders of such shares of Series Preferred Stock so called for redemption shall look only to the Corporation for payment of the redemption price. Notwithstanding the foregoing, no redemption of any shares of any series of Series Preferred Stock shall be made by the Corporation (1) which as of the date of mailing of the notice of such redemption would, if such date were the date fixed for redemption, reduce the net assets of the Corporation remaining after such redemption below the aggregate amount payable upon voluntary or involuntary liquidation, dissolution or winding up to the holders of shares having rights senior or equal to the Series Preferred Stock in the assets of the Corporation upon liquidation, dissolution or winding up; or (2) unless all cumulative dividends for the current and all prior dividend periods have been declared and paid or declared and set apart for payment on all shares of the Corporation having a right to cumulative dividends; or (3) at a redemption price in excess of $55.00 per share plus all accrued and unpaid dividends thereon to the date fixed for redemption. No sinking funds shall be created for the redemption, purchase or reacquisition otherwise of any shares of any series of Series Preferred Stock not called for redemption as above provided. (c) COMMON STOCK 1. DIVIDENDS: Subject to all of the rights of the Preferred Stock and the Series Preferred Stock, dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends. 2. VOTING RIGHTS: Except as otherwise expressly provided with respect to the Preferred Stock and the Series Preferred Stock or with respect to any series of the Series Preferred Stock, the Preferred Stock and the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Preferred Stock and the Common Stock being entitled to one vote for each share thereof held. 3. LIQUIDATION: Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and after the holders of the Preferred Stock and holders of the Series Preferred Stock of each series shall have been paid in full the amounts to which they respectively shall be entitled, or an amount sufficient to pay the aggregate amount to which the holders of the Preferred Stock and the Series Preferred Stock of each series shall be entitled shall have been deposited with a bank or trust company having its principal office in the Borough of Manhattan, The City of New York, and having a capital, surplus and undivided profits of at least -7- Twenty-Five Million Dollars ($25,000,000) as a trust fund for the benefit of the holders of such Preferred Stock and Series Preferred Stock, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of such Preferred Stock, and Series Preferred Stock. (d) GENERAL PROVISIONS Shares of Preferred Stock of the Corporation redeemed as hereinabove provided shall be deemed retired and extinguished and may not be reissued. A consolidation or merger of the Corporation with or into another corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Article. No holder of Common Stock, Preferred Stock or Series Preferred Stock of the Corporation shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration, or by way of dividend. FOURTH: The office of the Corporation shall be located in the City, County and State of New York. The address to which the Secretary of State shall mail a copy of process in any action or proceeding against the Corporation which may be served upon him is 7733 Forsyth Boulevard, St. Louis, Missouri 63105. FIFTH: The duration of the Corporation shall be perpetual. SIXTH: The Secretary of State of New York is designated as the agent of the Corporation upon whom process in any action or proceeding against it may be served. In addition, CT Corporation System, 1633 Broadway, New York, New York 10019, is designated as the registered agent of the Corporation upon whom process in any action or proceeding against it may be served. SEVENTH: The following provisions are inserted for the regulation and conduct of the affairs of the Corporation, and it is expressly provided that they are intended to be in furtherance and not in limitation or exclusion of the powers conferred by statute. (a) The Board of Directors may by resolution passed by two-thirds of the whole Board designate three or more of its number to constitute an Executive Committee, which shall have and exercise, subject to such limitations, if any, as may be prescribed by the By-Laws or by resolution of the Board of Directors, the powers of the Board of Directors in the management of the business and affairs of the Corporation, provided such Executive Committee shall act only at such times as the Board of Directors is not in session and in no case to the exclusion of the right of the Board of Directors at any time to act as a Board upon any business of the Corporation. (b) Subject to the provisions of the By-Laws, meetings of the stockholders and directors of the Corporation for all purposes may be held at any place within the State of New York and, unless otherwise provided by law, at any place without such State. (c) All corporate powers, including the sale, mortgage, hypothecation and pledge of the whole or any part of the corporate property, shall be exercised by the Board of Directors, except as otherwise expressly provided by law. (d) The Board of Directors is hereby expressly authorized to apply in its discretion such portion of the net income of the Corporation as it deems advisable to the redemption or purchase for retirement of the Preferred -8- Stock at an amount not exceeding the redemption price thereof, whether or not there are dividends in arrears on the Preferred Stock and whether or not any dividends have been paid on the Common Stock. (e) The Corporation may have one or more offices within or without the State of New York and may keep the books of the Corporation, subject to the provisions of the laws of the State of New York, at such place or places within or without the State of New York as the Board of Directors shall from time to time determine. (f) The Board of Directors shall from time to time decide whether and to what extent and at what times and under what conditions and requirements the accounts and books of the Corporation, or any of them, except the stock book, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any books or documents of the Corporation except as conferred by the laws of the State of New York or authorized by the Board of Directors. (g) A director of the Corporation shall not, in the absence of fraud, be disqualified by his office from dealing with or contracting with the Corporation either as vendor, purchaser or otherwise, nor, in the absence of fraud, shall any transaction or contract of the Corporation be void or voidable or affected by reason of the fact that any director or any firm, of which any director is a member, or any corporation, of which the director is an officer, director or stockholder, is in any way interested in such transaction or contract; provided that at the meeting of the Board of Directors or of the Committee thereof having authority in the premises to authorize or confirm said contract or transaction, the interest of such director, firm or corporation is disclosed or known, and there shall be present a quorum of directors or of the directors constituting such Committee not so interested or connected, and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Nor shall any director or directors so interested or connected be liable to the Corporation or to any stockholders or creditor thereof or to any other person for any loss incurred by it under or by reason of any such contract or transaction. Nor shall any such director or directors be accountable for any gains or profits realized thereon; always provided, however, that such contract or transaction shall at the time it was entered into have been a reasonable one to have been entered into and shall have been upon terms that at the time were fair. (h) Any contract, transaction or act of the Corporation or of the Board of Directors or of the Executive Committee or of any other duly constituted committee and of which disclosure shall be made in the notice of the meeting and which shall be approved or ratified by a majority in interest of a quorum of the stockholders of the Corporation having voting power at any annual or any special meeting called for such purpose shall, except as otherwise specifically provided herein or provided by the laws of the State of New York, be as valid and as binding as though approved or ratified by every stockholder of the Corporation; provided, however, that any failure of the Stockholders to approve or ratify such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or to deprive the Corporation, its directors or officers of their right to proceed with such contract, transaction or action. Any director of the Corporation may vote upon any contract or other transaction between the Corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation. (i) The Board of Directors shall have power from time to time to fix and to determine and vary the amount of the working capital of the Corporation, and to direct and determine the use and disposition of any surplus or net profits over and above the capital stock paid in; and in its discretion the Board of Directors may use and apply any such surplus or accumulated profits in purchasing or acquiring bonds or other obligations of the Corporation, to such extent and in such manner and upon such terms as the Board of Directors shall deem expedient. (j) Directors may be removed at any time by a majority vote of the stockholders entitled to vote, except that directors elected by any class of stock, voting separately as a class, may be removed only by a majority vote of such class, voting separately as a class, so long as the voting power of such class shall continue. (k) A person who is or was a director of the Corporation shall not be liable to the Corporation or its stockholders for damages for any breach of duty in such capacity occurring after the adoption of this paragraph -9- (k), except that the foregoing provisions shall not eliminate or limit liability where such liability is imposed, from time to time, by the law of New York State, provided, however, that nothing in this paragraph shall directly or indirectly increase the liability of any such person based upon acts or omissions occurring before the adoption hereof. EIGHTH: The Corporation hereby reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation as now stated and as hereafter amended, altered or changed in the manner now or hereafter prescribed by the laws of the State of New York, and all rights and powers conferred by this Certificate of Incorporation on stockholders, directors, or officers of the Corporation are hereby granted subject to this reservation; provided that the provisions of this Certificate of Incorporation, as so amended, changed, altered or repealed, shall contain such provisions as shall be lawful. NINTH: The number of directors of the Corporation, exclusive of directors, if any, to be elected by the holders of 4% Cumulative Preferred Stock or the holders of one or more series of Series Preferred Stock pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of Section (b), respectively, of ARTICLE THIRD herein, shall be not less than ten nor more than sixteen. Subject to such limitation, such number may be fixed by the By-Laws, or by action of the stockholders or of the Board under the specific provisions of a By-Law adopted by the stockholders. The directors of the Corporation shall be divided into three classes as nearly equal in number as possible. There shall be at least three directors in each class. The term of office of the first class shall expire at the first annual meeting of stockholders succeeding the initial classification of directors, the term of the office of the second class shall expire at the second annual meeting succeeding such classification and that of the third class at the third annual meeting succeeding such classification. At each annual meeting, directors to replace those whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting. If the number of directors is changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. If the number of directors is increased by the Board of Directors and any newly created directorships are filled by the Board, there shall be no classification of the additional directors until the next annual meeting of stockholders. Notwithstanding the foregoing, if the holders of 4% Cumulative Preferred Stock or the holders of one or more series of Series Preferred Stock shall become entitled to elect two members of the Board pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of Section (b), respectively, of ARTICLE THIRD herein, the terms of all members of the Board of Directors previously elected shall expire at the time of such election and the entire Board of Directors shall be elected in the manner specified in said Paragraph 2 of Section (a) or said Paragraph 3 of Section (b) of ARTICLE THIRD, each director to serve until the next meeting of stockholders at which directors are elected; and whenever neither the holders of the 4% Cumulative Preferred Stock nor the holders of any series of Series Preferred Stock is any longer entitled to vote for the election of two directors as provided in said Paragraph 2 of Section (a) or said Paragraph 3 of Section (b) of ARTICLE THIRD, the directors shall be elected at the next annual meeting of stockholders held for such purpose in the manner provided in the first eight sentences of this ARTICLE. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term of three years. No amendment to the Certificate of Incorporation of the Corporation shall amend, alter, change or repeal any of the provisions of this ARTICLE NINTH unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote of the holders of two-thirds of the shares of all classes of stock of the Corporation entitled to vote in elections of directors, considered for the purposes of this ARTICLE NINTH as one class. TENTH: (a) The affirmative vote of the holders of not less than a majority of the Voting Stock (as hereinafter defined) of the Corporation shall be required before the Corporation may purchase any outstanding shares of Common Stock of the Corporation at a price known by the Corporation to be above Market Price (as hereinafter defined) from a person known by the Corporation to be a Selling Shareholder (as hereinafter defined), unless the purchase is made by the Corporation on the same terms and as a result of a duly authorized offer to purchase any and all of the outstanding shares of Common Stock of the Corporation. (b) For purposes of ARTICLE TENTH: -10- (1) The term "Voting Stock" shall mean the outstanding shares of stock of the Corporation entitled to vote in elections of directors of the Corporation considered as one class. (2) The majority vote required by Section (a), when applicable, shall be in addition to any lesser vote or no vote required or permitted by law or this Certificate of Incorporation exclusive of this ARTICLE TENTH and the shares of the Selling Shareholder shall, for this purpose, be counted as having abstained regardless of how they have been voted. (3) The term "Market Price" shall mean the highest closing sale price, during the 30-day period immediately preceding the date in question, of a share of the Common Stock of the Corporation on the Composite Tape for New York Stock Exchange Issues, or, if such stock is not quoted on the Composite Tape or is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock. (4) The term "Selling Shareholder" shall mean and include any person who or which is the beneficial owner of in the aggregate more than three percent of the outstanding shares of Common Stock of the Corporation and who or which has purchased or agreed to purchase any of such shares within the most recent two-year period. (5) A "person" shall mean any individual, firm, partnership, corporation or other entity. (6) A person shall be the "beneficial owner" of any shares of Common Stock of the Corporation: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is conditional or exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing thereof. (7) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on July 1, 1984. (8) For the purposes of determining whether a person is a Selling Shareholder, the number of shares of Common Stock deemed to be outstanding and the number of shares beneficially owned by the person shall include shares respectively deemed owned through application of paragraph (6) of this Section (b) but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise, or shares of the Selling Shareholder whose acquisition of more than three percent of the outstanding shares of Common Stock of the Corporation within the most recent two-year period results from other than a purchase or agreement to purchase or vote shares of the Corporation. -11- (9) Nothing contained in this ARTICLE TENTH shall be construed to relieve any Selling Shareholder from any fiduciary obligation imposed by law. (10) The Board of Directors of the Corporation shall have the power to determine the application of or compliance with this ARTICLE TENTH, including, without limitation, (1) whether a person is a Selling Shareholder; (2) whether a person is an Affiliate or Associate of another; (3) whether Section (a) is or has become applicable in respect of a proposed transaction; (4) what is the Market Price and whether a price is above Market Price; and (5) when or whether a purchase or agreement to purchase any share or shares of Common Stock of the Corporation has occurred and when or whether a person has become a beneficial owner of any share or shares of Common Stock of the Corporation. Any decision or action taken by the Board of Directors arising out of or in connection with the construction, interpretation and effect of this ARTICLE TENTH shall lie within their absolute discretion and shall be conclusive and binding except in circumstances involving bad faith. ELEVENTH: SECTION 1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. A. HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in Section 2 of this ARTICLE ELEVENTH, any transaction or contract which involves or includes: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $50,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities (to the extent the acquisition thereof does not come within the requirements of ARTICLE TENTH) or other property (or a combination thereof) having an aggregate Fair Market Value of $50,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of Equity Security (as hereinafter defined) of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder: shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or in any agreement with any national securities exchange or this Certificate of Incorporation exclusive of this ARTICLE ELEVENTH. -12- B. DEFINITION OF "BUSINESS COMBINATION". The term "Business Combination" used in this ARTICLE ELEVENTH shall mean any transaction or contract which is referred to in any one or more of clauses (i) through (v) of Paragraph A of this Section 1. Section 2. WHEN HIGHER VOTE IS NOT REQUIRED The provisions of Section 1 of this ARTICLE ELEVENTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of this Certificate of Incorporation, if all of the conditions specified in either of the following Paragraphs A or B are met: A. APPROVAL BY DIRECTORS. The Business Combination shall have been approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH. B. PRICE AND PROCEDURE REQUIREMENTS. All of the following conditions shall have been met: (i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of Common Stock acquired by it (1) within the two-year period immediately prior to the first public announcement of the terms of the proposed Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; or (b) The Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this ARTICLE ELEVENTH as the "Determination Date"), whichever is higher; (ii) The aggregate amount of the cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the higher of the following (it being intended that the requirements of this paragraph B (ii) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Shareholder has previously acquired any shares of a particular class of Voting Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of such class of Voting Stock acquired by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; (b) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (c) The Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. -13- (iii) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class of Voting Stock. If the Interested Shareholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. The price determined in accordance with paragraph B (i) and B (ii) of this Section 2 shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding stock having preference over the Common Stock as to dividends or upon liquidation; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH; and (c) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock or securities convertible into Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (v) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Section 3. CERTAIN DEFINITIONS. For the purpose of this ARTICLE ELEVENTH: A. A "person" shall mean any individual, firm, corporation or other entity. B. "Interested Shareholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: (i) is the beneficial owner, directly or indirectly, of 20% or more of the voting power of the outstanding Voting Stock; or (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 20% or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any -14- Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. C. A person shall be a "beneficial owner" of any Voting Stock: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. D. For the purpose of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C of this Section 3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on July 1, 1984. F. "Subsidiary" means any corporation of which a majority of any class of Equity Security is owned, directly or indirectly, by the Corporation, provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Section 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of Equity Security is owned, directly or indirectly, by the Corporation. G. "Fair Market Value" means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange issues, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. H. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs B (i) and (ii) of Section 2 of this ARTICLE ELEVENTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. -15- I. "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on July 1, 1984. Section 4. POWERS OF THE BOARD OF DIRECTORS. The Board of Directors, in accordance with the requirements of ARTICLE SEVENTH, shall have the power to interpret all of the terms and provisions of this ARTICLE ELEVENTH, including, without limitation, and on the basis of information known to the Board after reasonable inquiry (a) whether a person is an Interested Shareholder, (b) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $50,000,000 or more. Section 5. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS. Nothing contained in this ARTICLE ELEVENTH shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. Section 6. AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws or otherwise) the affirmative vote or consent of the holders of 80% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this ARTICLE ELEVENTH or any provision hereof. VI: That the restatement of the Certificate of Incorporation and the amendment to Article Fourth contained therein were authorized by a vote of the majority of directors present at a meeting of the Board at which a quorum was present. IN WITNESS WHEREOF, we have made, subscribed and verified the Certificate this 22nd day of June, 1994. Mallinckrodt Group Inc. ---------------------------------------------------- C. Ray Holman, PRESIDENT AND CHIEF EXECUTIVE OFFICER ---------------------------------------------------- Roger A. Keller, VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL (CORPORATE SEAL) State of Missouri ) ) ss.: County of St. Louis ) C. Ray Holman, being duly sworn, deposes and says that: he is President and Chief Executive Officer of Mallinckrodt Group Inc., the corporation named in and described in the foregoing certificate; he has read the foregoing certificate and knows the contents thereof; and the same is true of his own knowledge, except as to the matters therein stated to be alleged upon information and belief, and as to those matters he believes to be true. ----------------------------------------------------- C. Ray Holman Sworn to before me this _____ day of __________, 1994. - ------------------------------------------------------ Notary Public -16- My Commission Expires: _________________________. -17- EX-4.5 3 FORM 8-A Exhibit 4.5 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM 8-A FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 ________________________ MALLINCKRODT GROUP INC. (formerly known as IMCERA Group Inc.) (Exact name of registrant as specified in its charter) NEW YORK 36-1263901 (State of incorporation or organization) (IRS employer identification number) 7733 FORSYTH BOULEVARD, ST. LOUIS, MISSOURI 63105 (Address of principal executive offices) (Zip Code) SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT - ------------------------------------------------------------------------------- Title of each class Name of each exchange on which to be so registered each class is to be registered - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 6% Notes due October 15, 2003 New York Stock Exchange, Incorporated - ------------------------------------------------------------------------------- 7% Debentures due December 15, 2013 New York Stock Exchange, Incorporated - ------------------------------------------------------------------------------- SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT None Item 1. Description of Registrant's Securities to be Registered. On April 27, 1992, Registration Statement No. 33-47081 on Form S-3 of Mallinckrodt Group Inc., formerly known as IMCERA Group Inc. (the "Company"), a New York corporation, relating to $250,000,000 of Debt Securities, was declared effective. (a) $100,000,000 AGGREGATE PRINCIPAL AMOUNT OF 6% NOTES DUE OCTOBER 15, 2003 (THE "NOTES") OF THE COMPANY. The Company issued a Prospectus, dated October 12, 1993, as supplemented by Prospectus Supplement dated October 19, 1993, pursuant to the aforementioned Registration Statement, relating to the Notes. The information set forth under the caption "Description of the Securities" in such Prospectus and under the caption "Description of the Notes" in such Prospectus Supplement is incorporated herein by reference. (b) $100,000,000 AGGREGATE PRINCIPAL AMOUNT OF 7% DEBENTURES DUE DECEMBER 15, 2013 (THE "DEBENTURES") OF THE COMPANY. The Company issued a Prospectus, dated December 1, 1993, as supplemented by Prospectus Supplement dated December 8, 1993, pursuant to the aforementioned Registration Statement, relating to the Debentures. The information set forth under the caption "Description of the Securities" in such Prospectus and under the caption "Description of the Debentures" in such Prospectus Supplement is incorporated herein by reference. Item 2. Exhibits Exhibit Number 4.1 Form of Indenture dated as of March 15, 1985 between the Company and Morgan Guaranty Trust Company of New York, as Trustee, including Form of Securities (incorporated by reference to Registration Statement No. 2-96566) 4.2 Form of First Supplemental Indenture dated as of April 1, 1992, to Indenture dated March 15, 1985 (incorporated by reference to Registration Statement No. 33-47081) 4.3 Specimen 6% Note due October 15, 2003 4.4 Specimen 7% Debenture due December 15, 2013 -2- Signature Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized. MALLINCKRODT GROUP INC. By/s/ WILLIAM B. STONE ------------------------------------- Name: William B. Stone Title: Vice-President and Controller Date: May 6, 1994 -3- EXHIBIT INDEX Sequentially Exhibit Numbered Number Description Page - ------- ----------- ------------ 4.1 Form of Indenture dated as of March 15, 1985 between the Company and Morgan Guaranty Trust Company of New York, as Trustee, including Form of Securities (incorporated by reference to Registration Statement No. 2-96566) 4.2 Form of First Supplemental Indenture dated as of April 1, 1992, to Indenture dated March 15, 1985 (incorporated by reference to Registration Statement No. 33-47081) 4.3 Specimen 6% Note due October 15, 2003 4.4 Specimen 7% Debenture due December 15, 2013 -4- EX-10.1(E) 4 EXHIBIT 10.1(E) Exhibit 10.1(e) EMPLOYMENT AGREEMENT THIS AGREEMENT between International Minerals & Chemical Corporation, a New York corporation (the "Company"), and Beverley L. Hayes ("Executive"), is made as of the 7TH day of MARCH, 1990, to become effective as provided below; WITNESSETH THAT: A. The Company wishes to attract and retain well-qualified executive and key personnel and to assure itself of the continuity of its management. B. Executive is an officer or other key executive of the Company with significant management responsibilities in the conduct of its business. C. The Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive. D. The Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise and Executive may have concerns about the continuation of her employment status and responsibilities and may be approached by others offering competing employment opportunities, and the Company therefore desires to provide Executive assurance as to the continuation of her employment status and responsibilities in such event. E. The Company further desires to assure that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to her financial wellbeing. F. Executive is willing to continue to serve as such but desires assurance that in the event of such a change in control she will continue to have the employment status and responsibilities she could reasonably expect absent such event and that in the event this turns out not to be the case she will have fair and reasonable severance protection on the basis of her service to the Company to that time. NOW, THEREFORE, it is hereby agreed by and between the parties as follows: 1. OPERATION OF AGREEMENT. The "effective date of this Agreement" shall be the date on which a change in control of the Company (as described in Section 2) occurs. This Agreement shall not become effective, and the Company shall have no obligation hereunder, if the employment of Executive with the Company shall terminate for any reason prior to a change in control of the Company. Executive shall have no right on account of this Agreement to be retained in the employ of the Company or to be retained in any particular position in the Company, unless and until a change in control has occurred. 2. CHANGE IN CONTROL. The term "change in control of the Company" shall mean, and be deemed to have occurred, on the date of the -2- first to occur of any of the following: (a) there occurs a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8-K, promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement or, if neither item remains in effect, any regulations issued under the Securities Exchange Act of 1934 which serve similar purposes; (b) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities except the event described in this paragraph shall not be deemed to have occurred by virtue of ownership of any securities of the Company by the Company or by any employee benefit plan sponsored by the Company; (c) individuals who, on February 21, 1990, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that (i) any person becoming a director subsequent to February 21, 1990, whose election, or nomination for election, by the Company's shareholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this paragraph (c), considered as though such person were a member of the Incumbent Board, and (ii) in the event that after February 21, 1990, the Board of Directors by a vote of at least three-quarters of the directors comprising the Incumbent Board shall have reduced or enlarged the size of the Board of Directors or recommended to shareholders such a reduction or enlargement, upon such reduction or enlargement having occurred, the Board of Directors as so reduced or enlarged shall thereupon constitute the Incumbent Board for all purposes including, without limitation, for the purpose of determining what thereafter constitutes the -3- majority or three-quarters specified above; (d) the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than 50% of the total voting power of the surviving corporation is represented by shares held by shareholders of the Company prior to such merger or consolidation; or (e) the Company shall have sold all or, as determined by the Board of Directors, substantially all of its assets to another corporation or other entity or person. 3. EMPLOYMENT. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the period commencing on the effective date of this Agreement and ending on the last day of the month in which occurs the third anniversary of the effective date of this Agreement (the "Employment Period"). During the Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the effective date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the effective date of this Agreement or at such other location as the Company may reasonably require; provided that the Executive shall not be required to accept any such other location that she deems unreasonable in the light of her personal circumstances. The Executive agrees that during the Employment Period she shall devote her full business time exclusively to her responsibilities as described herein and shall perform -4- faithfully and efficiently such responsibilities and the responsibilities set forth in the Employee Invention and Secrecy Agreement that is attached to and made a part hereof as Exhibit A. 4. COMPENSATION AND BENEFITS. During the Employment Period, the Executive shall receive the following compensation and benefits: (a) She shall receive an annual base salary which is not less than her annual base salary immediately prior to the effective date of this Agreement, with the opportunity for increases, from time to time thereafter which are in accordance with the Company's regular executive compensation practices. (b) She shall be eligible to participate on a reasonable basis, and to continue her existing participation, in annual incentive, stock option, restricted stock, long-term incentive performance, and any other incentive compensation plan which provides opportunities to receive compensation in addition to her annual base salary which are the greater of (i) the opportunities provided by the Company for executives with comparable duties or (ii) the opportunities under any such plans in which she was participating immediately prior to the effective date of this Agreement. (c) She shall be entitled to receive and participate in salaried employee benefits (including, but not limited to, medical, life and accident insurance, investment, stock ownership, and disability benefits) and perquisites which are the greater of (i) the employee benefits and perquisites provided by the Company to executives with comparable duties or (ii) the employee benefits and perquisites to which she was entitled or in which she participated immediately prior to the effective date of this Agreement. (d) She shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees; the Company's supplemental executive retirement plan if, on the effective date, she is a participant in such plan; and, any -5- successor or other retirement plan or agreement in effect on the effective date of this Agreement in respect of her retirement, whether or not a qualified plan or agreement, so that her aggregate monthly retirement benefit from all such plans and agreements (regardless when she begins to receive such benefit) will be not less than it would be had all such plans and agreements in effect immediately prior to the effective date of this Agreement continued to be in effect without change until and after she begins to receive such benefit. 5. TERMINATION. The term "Termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company for any reason other than death, disability (as described below), cause (as described below), or voluntary resignation (as described below). (a) The term "disability" means physical or mental incapacity qualifying the Executive for long term disability under the Company's long term disability plan. (b) The term "cause" means (i) the willful and continued failure of the Executive to perform substantially her duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to her by the Board of Directors which specifically identifies the manner in which the Board believes she has not substantially performed her duties or (ii) willful misconduct materially and demonstrably injurious to the Company. No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by her not in good faith and without reasonable belief that her action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of her position, authorities or duties, a reduction in her total compensation or benefits, a relocation that she deems unreasonable in light of her personal circumstances, or other action by or request of the Company in respect of her position, authority, or responsibility that she reasonably -6- deems to be contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to her a copy of a resolution, duly adopted by a vote of three-quarters of the entire Board of Directors of the Company at a meeting of the Board called and held (after reasonable notice to the Executive and an opportunity for the Executive and her counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board the Executive has been guilty thereof and specifying the particulars thereof. (c) The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) The Executive's resignation or retirement is requested by the Company other than for cause; (ii) Any other significant change in the nature or scope of the Executive's position, authorities or duties from those described in Section 3; (iii) Any other reduction in her total compensation or benefits from that provided in Section 4; (iv) The breach by the Company of any other provision of this Agreement; or (v) The reasonable determination by the Executive that, as a result of a change in control of the Company and a change in circumstances thereafter significantly affecting her position, she is unable to exercise the authorities and responsibilities attached to her position and contemplated by Section 3. (d) Termination that entitles the Executive to the -7- payments and benefits provided in Section 6 shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of her participation, award, or eligibility for the purpose of any plan, practice or agreement of the Company referred to in Section 4. 6. TERMINATION PAYMENTS AND BENEFITS. In the event of and within 30 days following Termination, the Company shall pay to the Executive: (a) Her base salary and all other benefits due her as if she had remained an employee pursuant to this Agreement through the remainder of the month in which Termination occurs less applicable withholding taxes and other authorized payroll deductions; (b) The amount equal to the target award for the Executive under the Company's annual incentive compensation plan for the fiscal year in which Termination occurs, reduced pro rata for that portion of the fiscal year not completed as of the end of the month in which Termination occurs, provided that if the Executive has deferred her award for such year under the plan, the payment due the Executive under this Paragraph (b) shall be paid in accordance with the terms of the deferral; and (c) A lump sum severance allowance in an amount which is equal to the sum of the amounts determined in accordance with the following subparagraphs (i) and (ii): (i) an amount equivalent to twice her annual base salary at the rate in effect immediately prior to Termination; and (ii) an amount equivalent to twice the average of the annual incentive compensation received or deferred by the Executive for the two fiscal years immediately prior to the fiscal year in which Termination occurs. If the Executive's Termination occurs within her first year of employment with the Company and before she has received or deferred annual incentive -8- compensation, her severance allowance under subparagraph (ii) will be $300,000. If her Termination occurs during her second year of employment with the Company and after she has received or deferred annual incentive compensation (if any) for the first fiscal year of her employment, but she has not yet received or deferred her annual incentive compensation for the second fiscal year, her severance allowance under subparagraph (ii) will be an amount equivalent to twice the average of: (i) the amount (if any) of annual incentive compensation which she received or deferred during the first fiscal year prior to Termination and (ii) $150,000. 7. NON-COMPETITION AND CONFIDENTIALITY. The Executive agrees that: (a) there shall be no obligation on the part of the Company to provide any further payments or benefits (other than payments or benefits already earned or accrued) described in Section 6 if, when, and so long as the Executive shall be employed by or otherwise engage in any business which is competitive with any business of the Company or of any of its subsidiaries, as such business existed as of the effective date of this Agreement, in which the Executive was engaged during her employment, and if such employment or activity is likely to cause or causes serious damage to the Company or any of its subsidiaries; and (b) during and after the Employment Period, she will not divulge or appropriate to her own use or the use of others any secret or confidential information pertaining to the business of the Company or any of its subsidiaries obtained during her employment by the Company, it being understood that this obligation shall not apply when and to the extent any of such information becomes publicly known or available other than because of her act or omission. 8. ARRANGEMENTS NOT EXCLUSIVE OR LIMITING. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive -9- personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefit to which Executive would be entitled but for this Agreement. 9. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a change in control, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of her rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any settlement of her rights hereunder under threat of incurring such costs. Accordingly, if at any time after the effective date of this Agreement, it should appear to Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable or for any other reason, or that the Company has purported to terminate her employment for cause or is in the course of doing so in either case contrary to this Agreement, or in the event that the Company or -10- any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits provided or intended to be provided to her hereunder, and the Executive has acted in good faith to perform her obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of her choice at the expense of the Company to represent her in connection with the protection and enforcement of her rights hereunder, including without limitation representation in connection with termination of her employment contrary to this Agreement or with the initiation or defense of any litigation or other legal action, whether by or against the Executive or the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company on a regular, periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $200,000. Counsel so retained by Executive may be counsel representing other officers or key executives of the Company in connection with the protection and enforcement of their rights under similar agreements between them and the Company and unless, in her sole judgment, use of common counsel could be prejudicial to her or would not be likely to reduce the fees and expenses chargeable hereunder to the Company, the Executive agrees to use her best efforts to agree with such other officers or executives to retain -11- common counsel. 10. NOTICES. Any notices, requests, demands and other communications provided for by this Agreement shall be in writing and personally delivered by hand or sent by registered or certified mail, if to the Executive, to her at the last address she has filed in writing with the Company or, if to the Company, to its corporate secretary at its principal executive office. 11. NON-ALIENATION. The Executive shall not have any right to pledge, hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 12. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement of the parties in respect of the subject matter hereof. No provision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other person to any such amendment, waiver or discharge shall not be required. 13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise, including without limitation any corporation or other entity or person which shall succeed (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the -12- business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of Executive and her legal representatives, heirs, and assigns, provided, however, that in the event of Executive's death prior to payment or distribution of all amounts, distributions, and benefits due her hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive to the Company to receive such payment or distribution and, in the event Executive has made no applicable designation, to the person or persons designated by Executive as the beneficiary or beneficiaries of proceeds of life insurance payable in the event of Executive's death under the Company's group life insurance plan. 14. GOVERNING LAW. Except to the extent required to be governed by the law of the State of New York because the Company is incorporated under the laws of that state, the validity, interpretation, and enforcement of this Agreement shall be governed by the law of whichever of the State of Illinois or the State of New York that to the greater extent permits or does not prevent the enforcement of this Agreement in accordance with its terms. 15. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 16. COUNTERPARTS. This Agreement may be executed in one or -13- more counterparts, each of which shall be deemed to be an original but all of which together constitute one and the same instrument. ----------------------------------------- IN WITNESS WHEREOF, the Executive has hereunto set her hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first shown above written. /S/ BEVERLEY L. HAYES ----------------------------------- Executive INTERNATIONAL MINERALS & CHEMICAL CORPORATION By /S/ GEORGE D. KENNEDY ----------------------------------- ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER (SEAL) ATTEST /S/ K.J. BURNS, JR. - -------------------- Secretary -14- EX-10.7(A)(II) 5 EXHIBIT 10.7(A)(II) Exhibit 10.7 (a)(ii) September 1, 1993 C.R. HOLMAN Dear Ray: This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated July 1, 1992, and as subsequently amended by letter dated April 30, 1993. The amendment is necessary due to the recent increase in your compensation and executive benefits. Effective upon your acceptance of this amendment, the last sentence of the opening paragraph of your Gross-Up Agreement is amended as follows: "Notwithstanding the foregoing, your Gross-Up Payment, if any, may not exceed $3,408,779." Except as modified hereby all other terms and provisions of your Gross-Up Agreement with the Company will remain in full force and effect. Please indicate your acceptance of the amendment to your Gross-Up Agreement dated July 1, 1992, and as subsequently amended by letter dated April 30, 1993 by signing the attached copy of this letter and returning it to my attention. Very truly yours, /s/ Beverley L. Hayes I have read this letter and understand and accept its terms. /s/ C.R. Holman - ---------------- C.R. Holman Dated this 10 day of September, 1993 September 1, 1993 EX-10.7(B)(II) 6 EXHIBIT 10.7(B)(II) Exhibit 10.7 (b)(ii) WILLIAM J. MERCER Dear Bill: This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated July 1, 1992, and as subsequently amended by letter dated April 30, 1993. The amendment is necessary due to the recent increase in your compensation and executive benefits. Effective upon your acceptance of this amendment, the last sentence of the opening paragraph of your Gross-Up Agreement is amended as follows: "Notwithstanding the foregoing, your Gross-Up Payment, if any, may not exceed $1,041,213." Except as modified hereby all other terms and provisions of your Gross-Up Agreement with the Company will remain in full force and effect. Please indicate your acceptance of the amendment to your Gross-Up Agreement dated July 1, 1992, and as subsequently amended by letter dated April 30, 1993 by signing the attached copy of this letter and returning it to my attention. Very truly yours, /s/ Beverley L. Hayes I have read this letter and understand and accept its terms. /s/ William J. Mercer - ---------------------- William J. Mercer Dated this day of September, 1993 ----- EX-10.7(C)(II) 7 EXHIBIT 10.7(C)(II) Exhibit 10.7 (c)(ii) September 1, 1993 ROBERT G. MOUSSA Dear Bob: This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated April 22, 1993. The amendment is necessary due to the recent increase in your compensation and executive benefits. Effective upon your acceptance of this amendment, the last sentence of the opening paragraph of your Gross-Up Agreement is amended as follows: "Notwithstanding the foregoing, your Gross-Up Payment, if any, may not exceed $1,187,749." Except as modified hereby all other terms and provisions of your Gross-Up Agreement with the Company will remain in full force and effect. Please indicate your acceptance of the amendment to your Gross-Up Agreement dated April 22, 1993, by signing the attached copy of this letter and returning it to my attention. Very truly yours, /s/ Beverley L. Hayes I have read this letter and understand and accept its terms. /s/ Robert G. Moussa - --------------------- Robert G. Moussa Dated this day of September, 1993 ----- EX-10.7(D)(II) 8 EXHIBIT 10.7(D)(II) Exhibit 10.7 (d)(ii) September 1, 1993 MACK G. NICHOLS Dear Mack: This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated July 1, 1992. The amendment is necessary due to the recent increase in your compensation and executive benefits. Effective upon your acceptance of this amendment, the last sentence of the opening paragraph of your Gross-Up Agreement is amended as follows: "Notwithstanding the foregoing, your Gross-Up Payment, if any, may not exceed $949,971." Except as modified hereby all other terms and provisions of your Gross-Up Agreement with the Company will remain in full force and effect. Please indicate your acceptance of the amendment to your Gross-Up Agreement dated July 1, 1992, by signing the attached copy of this letter and returning it to my attention. Very truly yours, /s/ Beverley L. Hayes I have read this letter and understand and accept its terms. /s/ Mack G. Nichols - -------------------- Mack G. Nichols Dated this 17 day of September, 1993 EX-10.7(E) 9 EXHIBIT 10.7(E) Exhibit 10.7 (e)(ii) September 1, 1993 BEVERLEY L. HAYES Dear Bev: This letter serves to amend your Gross-Up Agreement with IMCERA Group Inc. dated July 1, 1992. The amendment is necessary due to the recent increase in your compensation and executive benefits. Effective upon your acceptance of this amendment, the last sentence of the opening paragraph of your Gross-Up Agreement is amended as follows: "Notwithstanding the foregoing, your Gross-Up Payment, if any, may not exceed $834,461." Except as modified hereby all other terms and provisions of your Gross-Up Agreement with the Company will remain in full force and effect. Please indicate your acceptance of the amendment to your Gross-Up Agreement dated July 1, 1992, by signing the attached copy of this letter and returning it to my attention. Very truly yours, /s/ Ray Holman I have read this letter and understand and accept its terms. /s/ B.L. Hayes - --------------- Beverley L. Hayes Dated this 1st day of September, 1993 July 1, 1992 BEVERLEY L. HAYES Dear Bev, This letter is to assure you that in the event you become entitled to payments by operation of the Employment Agreement dated March 7, 1990 ("Agreement") between you and IMCERA Group Inc., formerly known as International Minerals & Chemical Corporation ("IMCERA"), and if any of the payments to be made under the Agreement ("Agreement Payments") will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended ("Code") (or any similar tax that may hereafter be imposed), IMCERA shall pay to you at the time specified in paragraph (c) below an additional amount ("Gross-up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the Gross-up Payment provided for by this paragraph, but before deduction for any federal, state or local income tax on the Agreement Payments, shall be equal to the sum of (a) the Total Payments, and (b) an amount equal to the product of any deductions disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. Notwithstanding the foregoing, your Gross-up Payment, if any, may not exceed $576,199. (1) For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) any other payments or benefits received or to be received by you in connection with a change in control (as the term is defined in the IMCERA Group Inc. Management Compensation and Benefit Assurance Program) of IMCERA or your termination of employment whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with IMCERA, any person whose actions result in a change of control of IMCERA or any person affiliated with IMCERA or such person) (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b) (1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by IMCERA's independent auditors, such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (b) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments or (ii) the amount of excess parachute payments within the meaning of, Section 280G(b)(1) of the Code (after applying clause (a), above), and (c) the value of any non-cash benefits or any deferred payment or benefit shall be determined by IMCERA's independent auditors in accordance with the principles of Sections 280(G)(d)(3) and (4) of the Code. (2) For purposes of determining the amount of the Gross-up Payment, you shall be deemed to (x) pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made and, (y) pay the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and (z) have otherwise allowable deductions for federal income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in your adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, you shall repay to IMCERA at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the portion of the Gross-up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), IMCERA shall make an additional gross-up payment in respect of sch excess (plus any interest payable with respect of such excess) at the time that the amount of such excess is finally determined. (3) The Gross-up Payment or portion thereof provided for in Paragraphs (1) and (2) above shall be paid not later than the thirtieth day following payment of any amounts under the Agreement; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, IMCERA shall pay to you on such day an estimate, as determined in good faith by IMCERA, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274 (b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth day after payment of any amounts under the Agreement. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by IMCERA to you, payable on the fifth day after demand by IMCERA (together with interest at the rate provided in Section 1274 (b)(2)(B) of the Code). Should a change in control occur (as defined in the Management Compensation and Benefit Assurance Program) and should Gross-up Payments become due you as a result of the operation of your Agreement, then such Gross-up Payments will be paid to you from the Trust Agreement between IMCERA Group Inc. and Wachovia Bank of North Carolina, N.A., which has been established to protect payment obligations of IMCERA under this letter agreement. IMCERA is pleased to be able to provide you with this additional assurance of economic protection in the event of a change in control. Please sign, date and return the original of this letter in the envelope provided and retain the enclosed copy for your records. Very truly yours, /s/ M.B. Ingle M.B. Ingle I have read this letter and understand and accept its terms. /s/ B.L. Hayes --------------- (Signed) 7-1-92 ------ (Dated) EX-10.24 10 EXHIBIT 10.24 Exhibit 10.24 CONSULTANCY AGREEMENT THIS AGREEMENT is entered into as of December 1, 1993, by and between Mallinckrodt Group Inc., a New York corporation (the "Company") and HERVE M. PINET ("Pinet"). WITNESSETH: WHEREAS, Pinet has special knowledge and ability with respect to international markets and financial transactions; and WHEREAS, the Company has determined that it would be beneficial to use the consulting services of Pinet to develop international business relationships and provide expertise in other international business matters; and WHEREAS, the Company wishes to clarity the capacity in which Pinet will provide such services to the Company; NOW, THEREFORE, it is mutually agreed as follows: 1. CONSULTANCY. Pinet will be retained as a consultant of the Company for the period December 1, 1993 through November 30, 1994. 2. CONSULTING SERVICES. As a consultant, Pinet will (i) assist the Company in forming strategic business relationships in Japan, China and Europe, (ii) advise the Company with respect to economic trends in Eastern and Western Europe with a particular focus on international banking transactions and, (iii) provide such other assistance with international matters as may be directed from time to time by the chief Executive Officer & President of the Company, C. Ray Holman. 3. CONSULTING FEE. The Company will pay Pinet for his consulting services and covenant not to compete, a monthly fee of Ten Thousand Dollars ($10,000.00) payable on the last day of each month. No other fees or commissions will be paid to Pinet arising out of his consulting services under this Agreement. This Agreement, however, will not preclude the payment of fees for services rendered by Pinet as a member of the Company's Board of Directors. 4. CONFIDENTIALITY OF COMPANY INFORMATION. Pinet agrees to maintain in strict confidence any nonpublic information concerning the Company and its subsidiaries that he knows or acquires in the course of rendering consulting services under this Agreement. 5. NON-COMPETE. In consideration of the fee provided in paragraph 3 above, Pinet agrees that he will not, during the term of this Agreement and for a period of one year thereafter, be employed by or otherwise render any services for any person or concern which is which he knows has the intention of becoming a direct competitor of any primary or developing product lines with the primary or developing market areas of any business of the Company or any wholly-owned subsidiary as it now exists or may exist at the expiration of this Agreement (and any extensions thereof) without the prior written consent of the Company, which consent will not be unreasonably withheld. 6. EXPENSES. The Company will pay or reimburse Pinet, as the case may be, for all expenses reasonably incurred by Pinet in rendering consulting services which have been approved by C. Ray Holman, the President and Chief Executive Officer of the Company, and for which a statement of itemized expenses with substantiating documentation has been provided. 7. TERMINATION. The Company's obligations to Pinet and Pinet's obligations to the Company as a consultant hereunder will terminate prior to November 30, 1994, only in the event of Pinet's death or disability, or if the Company determines that Pinet is in material default of his obligations under this Agreement, or is guilty of wilful misconduct or gross negligence in the performance thereof. For purposes of this paragraph, disability means a physical or mental disability which the Company's Chief Executive Officer has determined, acting with the advice of a competent medical doctor, renders or has rendered Pinet unable to perform consulting services hereunder for a consecutive period of one (1) month or more. No such determination will be made without at least ten (10) day's prior written notice to Pinet, or his spouse, or his personal representative, and such determination will not become effective to terminate the Company's obligations to Pinet as consultant hereunder until the last day of the month in which such notice is given. 8. INDEPENDENT CONTRACTOR STATUS. Pinet will be regarded as an independent contractor in all matters pertaining to services performed hereunder, and Pinet will not have the authority to assume, create, or incur any liability or any obligation of any kind, either express or implied, against or on behalf of the Company. 9. SEVERABILITY. This Agreement is divisible and separable so that if any provisions are held to be invalid, such holding will not impair the remaining provisions hereof. If any provision is held to be too broad to be enforced, such provision will be construed to create only an obligation to the full extent allowable by law. 10. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which need not contain the signatures of more than one party, but such counterparts taken together will constitute one and the same Agreement. 11. MISCELLANEOUS. The foregoing constitutes the entire Agreement between the parties and can be amended only by written agreement signed by both parties. Further, the Agreement will not be assignable or transferable, in whole or in part. Any payment required to be made by the Company pursuant to the Agreement to a person who is under a legal disability may be made by the Company to or for the benefit of such person in such of the following ways as the Company may determine: (a) directly to such person, (b) to the legal representative of such person, (c) to some near relative of such person, to be used for the latter's benefit, or (d) directly in payment of expenses in support, maintenance or education of such person. The Company will not be required to see to the application by any third party of any payments made pursuant hereto. All questions in respect of this Agreement, including those pertaining to its validity, interpretation and performance, shall be determined by the laws of the State of Illinois. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer and Pinet has set his hand and seal as of the date first above-written. Mallinckrodt Group Inc. By /s/ C.R. Holman ---------------- Its President and Chief Executive Officer ACCEPTED: By /s/ H. Pinet ------------ Date 12/1/93 ------- EX-10.29 11 EXHIBIT 10.29 Exhibit 10.29 MALLINCKRODT GROUP INC. DEFERRAL ELECTION PLAN FOR NON-EMPLOYEE DIRECTORS SECTION 1. INTRODUCTION 1.1 PURPOSE. The Mallinckrodt Group Inc. Deferral Election Plan for Non-Employee Directors (the "Plan") has been established by Mallinckrodt Group Inc. (the "Company") to encourage and enable non-employee members of the Board of Directors of the Company who have heretofore elected or hereafter elect to defer receipt of some or all of their Retainer and/or Attendance Fees to provide a degree of financial flexibility with respect to the receipt of income and, should they elect a deferral in the form of shares of common stock of the Company, to increase their holdings of such stock. 1.2 EFFECTIVE DATE. Subject to approval of the Plan by the shareholders of the Company at the Annual Meeting of Shareholders in calendar year 1994, as the same may be adjourned, the Plan shall be effective on June 30, 1994. The Plan shall be unlimited in duration. 1.3 SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 3.5, the amount of Stock which may be made subject to the Plan shall not exceed [50,000] shares of the Company's authorized but unissued Stock. 1.4 ADMINISTRATION. The authority to manage and control the operation and administration of the Plan shall be vested in the Corporate Governance Committee of the Board (the "Committee"). Subject to the limitations of the Plan, the Committee shall have the sole and complete authority: (a) to interpret the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to the Plan; (b) to correct any defect or omission or to reconcile any inconsistency in the Plan or in any payment made hereunder; and (c) to make all other determinations and to take all other actions necessary or advisable for the implementation and administration of the Plan. The Committee's determinations on matters within its authority shall be conclusive and binding upon the Company and all other persons. All expenses associated with the Plan shall be borne by the Company. 1.5 DEFINITIONS. The definitions applicable to the Plan include the following: (a) "Attendance Fee" means the fee payable to a non-employee director of the Company for attendance at a Board meeting or meeting of a Board committee (whether for in person attendance or attendance by conference telephone) and interest accrued on any deferral thereof as provided in Section 2.2 and, in respect of a Prior Plan Participant, also includes any attendance fee the payment of which has been duly deferred pursuant to the Directors' 1990 Deferred Compensation Plan and interest accrued thereon pursuant to that plan. (b) "Board" means the Board of Directors of the Company. (c) "Date of Purchase" shall mean January 2 or July 1, if a business day on which the New York Stock Exchange is open for trading (or, if not, the first such business day thereafter), as the terms of the Plan require. (d) "Directors' 1990 Deferred Compensation Plan" means the plan adopted by the Board on June 20, 1990, permitting any non-employee director of the Company irrevocably to elect to defer receipt of all or part of his or her future Retainer and/or Attendance Fees to a date certain following the time when such director ceases to serve as such or to some other specific future date selected by such director, at which date the director (or, in the event of death, a designated beneficiary) is entitled to receive in cash such deferred compensation together with interest thereon during the period of deferral in an amount equal to the prime rate quoted at the beginning of each calendar quarter by Bankers Trust Company of New York. (e) "Participant" means, as of any date, any director of the Company or Prior Plan Participant who is not, on that date (and any Prior Plan Participant who has never been), an employee of the Company or any corporation in which more than 50% of the total combined voting power of all classes of stock entitled to vote is owned, directly or indirectly, by the Company. For purposes of Section 2, a Prior Plan Participant shall be deemed to be a Participant in respect of amounts deferred under the Directors' 1990 Deferred Compensation Plan only if he or she shall have elected under Section 2.3 hereof to include such amounts in the Plan and for only so long as his or her irrevocable election under the Directors' 1990 Deferred Compensation Plan requires that such amounts not be delivered to the director (or a designated beneficiary). (f) "Prior Plan Participant" means any director of the Company on the effective date of the Plan and any retired member of the Board who were he or she still on the Board at the effective date would otherwise qualify as a Participant hereunder, and who in either case has heretofore elected pursuant to the Directors' 1990 Deferred Compensation Plan to defer some or all of his or her Board compensation eligible for deferral thereunder and who will not be entitled to receive (and whose designated beneficiary will not be entitled to receive) any sums (including interest thereon) deferred under the Directors' 1990 Deferred Compensation Plan until a date later than April 30, 1995. (g) "Retainer" means the annual fee payable in installments to a non-employee director of the Company for service as a director, a chairperson of a Board committee, or a member of the Executive Committee of the Board, and in respect of a Prior Plan Participant includes any such fee the payment of which has been duly deferred pursuant to the Directors' 1990 Deferred Compensation Plan and interest accrued thereon pursuant to that plan. (h) "Stock" means the $1.00 par value common stock of the Company. 1.6 COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock under the Plan unless such delivery would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity on which such class of Stock is admitted to trading or otherwise has trading privileges. Prior to the delivery of any shares of Stock under the Plan, the Company may require a written statement that the recipient is acquiring such shares for investment and not for the purpose or with the intention of distributing the shares. If the redistribution of shares of Stock is restricted pursuant to this Section, the certificates representing such shares, when issued, may bear a legend referring to such restriction. SECTION 2. RECEIPT OF STOCK OR CASH; DEFERRAL 2.1 RIGHT TO RECEIVE STOCK OR CASH. Subject to the availability of shares of Stock under the Plan, a member of the Board who is a Participant during any part of a fiscal year of the Company (and any present or former member of the Board who is a Prior Plan Participant) may elect pursuant to Section 2.3 to defer the receipt of some or all of the Retainer (in multiples of 25%) and/or 100% of Attendance Fees and, in respect of an election to receive shares of Stock, dividends paid on the Stock previously allocated to the Participant under this Plan as provided in Section 2.2, plus (whether in respect of an election to defer in the form of Stock or cash) accrued interest on cash deposited to his or her account as calculated under said Section 2.2. To the extent an election is made to defer for the purpose of purchase of Stock, the amounts deferred for such purpose in each six month period beginning July 1 and January 1, as the case may be (each six month period is hereafter referred to as a "Period"), and interest accrued thereon during such Period, shall be used for the purchase of Stock by the Company for the account of the Participant on the Date of Purchase next succeeding the end of the Period in respect of which such deferrals were made. In addition, a Prior Plan Participant may make a one-time election as provided in Section 2.3 to continue to defer in the form of cash and/or Stock, for the remainder of the previously elected period of deferral in respect of the amounts deferred pursuant to the Directors' 1990 Deferred Compensation Plan (including interest accrued thereon). In the event a Prior Plan Participant makes an election pursuant to Section 2.3 to defer in the form of Stock, then sums deferred under the Directors' 1990 Deferred Compensation Plan and elected to be rolled into the Plan for such purpose shall be used for the purchase of Stock on January 3, 1995. Should a Prior Plan Participant not make the one-time election permitted hereunder or elect to continue to defer hereunder in the form of cash some or all of the amounts deferred under the Directors' 1990 Deferred Compensation Plan, all amounts not deferred in the form of Stock hereunder shall constitute a cash deferral under the Plan as of the close of business on the date the vote of shareholders at the 1994 Annual Meeting shall be certified by the inspectors of election. 2.2 EQUIVALENT AMOUNT OF STOCK. The number of shares of Stock to be allocated for a Period to any Participant, calculated as of the Date of Purchase next succeeding the end of such Period utilizing sums accrued to the account of such Participant in respect of such Period by reason of the Participant's election under Section 2.3 to defer in the form of Stock, shall be equal to: (a) the aggregate amount of the Retainer, Attendance Fees and dividends paid on the Stock in respect of the Period to the extent the Participant elected to defer receipt of such amounts for such Period, plus interest accrued on the Retainer, Attendance Fees and dividends from and after the date when, but for the deferral hereunder, such amounts would be otherwise payable to the director (I.E., the last business day of each month in respect of the Retainer, the last business day of the month when the meeting or meetings in respect of which the Attendance Fee is payable was held and the payment date for any dividend declared on the Stock previously allocated to the Participant under the Plan receipt of which remains deferred pursuant to the Participant's election under Section 2.3) at a rate equal to the average of the prime rates charged by Bankers Trust Company of New York on the first day of each month of the Period (in respect of any Prior Plan Participant who shall have made the one-time election permitted under Section 2.3 (as contemplated by Section 2.1) the amount under this clause (a) shall also include the amount rolled into the Plan from the Directors' 1990 Deferred Compensation Plan); DIVIDED BY (b) the Fair Market Value of a share of Stock at the close of business on the day preceding the Date of Purchase. For this purpose, "Fair Market Value" as of any date means (i) the closing price (or, if not less than 31 days before a Date of Purchase the Committee so determines, the average of all closing prices during the 30 days preceding such Date of Purchase) for sales of Stock as reported on the Composite Transaction Reporting System on the New York Stock Exchange, which includes other participating exchanges and over the counter markets, on such date (or dates); or (ii) in the absence of a reported sale for such date (or dates), the average of the reported closing bid and asked prices for a share of Stock on such Exchange. Any fractional share of Stock remaining at the time of actual delivery of the Stock to the Participant in accordance with the terms of the Plan shall be distributed to the Participant in cash. 2.3 DEFERRAL ELECTION. (a) In lieu of receiving cash on the date the Retainer, Attendance Fee or dividend would otherwise have been received (and in respect of Prior Plan Participants when cash amounts previously irrevocably deferred under the Directors' 1990 Deferred Compensation Plan would otherwise be delivered to him or her), the Participant can elect to receive Stock, and the dividends paid on such Stock, if any, or cash, on a deferred basis for any period of such Participant's election, subject in respect of elections by Prior Plan Participants in respect of amounts deferred under the Directors' 1990 Compensation Plan to the last sentence of clause (a) of this Section 2.3. An election under this Section 2.3 shall be valid only if it is in a writing on a notice of election that complies with the requirements of clause (b) of this Section 2.3, is signed by the Participant, and, subject to and except as provided in the last sentence of this clause (a), is filed with the Company prior to the first day of any calendar year in respect of which the election is to apply (except that in respect of any election to defer amounts payable during the six months period beginning July 1, 1994, the notice of election shall be filed not later than June 30, 1994). Any such election shall be irrevocable with respect to the calendar year (or initial Plan Period) to which it relates and cannot be changed on and after the date of such election with respect to such calendar year (or initial Plan Period). Once effective, such election (except for the one-time irrevocable election permitted hereunder in respect of amounts deferred under the Directors' 1990 Compensation Plan) shall remain in effect for successive calendar years until it is revised or revoked. Any changes to such election applicable to a succeeding calendar year must be filed with the Company prior to the first day of the calendar year for which it is to apply. The election shall be subject to such other terms and conditions established from time to time by the Committee. The first permitted election hereunder for non-employee directors then serving as members of the Board, and the only permitted election hereunder by Prior Plan Participants in respect of amounts deferred under the Directors' 1990 Deferred Compensation Plan, subject in every case to shareholder approval of the Plan, shall be made not later than June 30, 1994. (b) In accordance with the terms of the Plan, the Participant (and, in the case of clause (v) below, the Prior Plan Participant) shall indicate on the notice of election whether and to what extent, but only in multiples of 50%, the deferral is to be in the form of cash or Stock and: (i) whether the Participant wishes to defer 100% of Attendance Fees (or no Attendance Fees) and the percentages of the Retainer (in multiples of 25%) and/or (in respect of Stock) dividends thereon he or she wishes to defer, if any; (ii) the date to which the deferral shall extend; (iii) whether (subject to the extent, if any, the Committee permits) distributions are to be in a single lump sum or in multiple (but not exceeding 10) installments; (iv) the Participant's designated beneficiary or beneficiaries in the event of his or her death; and (v) the extent to which any part of the cash deferred under the Directors' 1990 Deferred Compensation Plan shall be used to purchase Stock. (c) If a Participant dies before receiving all payments to which he or she is entitled under the Plan, payment shall be made on January 15 (or the next succeeding business day if January 15 is not a business day) of the calendar year following the date of death in accordance with the Participant's designation of a beneficiary on a form provided for that purpose and delivered to and accepted by the Committee or, in the absence of a valid designation or if the designated beneficiary does not survive the Participant, to such Participant's estate. 2.4 DIVIDENDS; VOTING. If the Participant elects not to defer receipt of dividends on Stock previously allocated, dividends on such Stock will be paid directly to the Participant as, if and when paid by the Company. If the Participant elects to defer receipt of the Stock, the Participant shall nevertheless have the right to vote the Stock purchased for the account of the Participant on any matters on which all other shareholders are otherwise entitled to vote. 2.5 SECURITIES LAW COMPLIANCE. Participation in the Plan in respect of deferrals in the form of Stock will be governed by, in addition to general corporate law (which shall apply irrespective of the form of the deferral), the rules and regulations promulgated by the Securities and Exchange Commission, in particular, Section 16 of the Securities Exchange Act of 1934. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies the applicable requirements of Rule 16b-3 of the Securities Exchange Act of 1934, so that Participants will be entitled to the benefits of Rule 16b-3, or other exemptive rules under Section 16 of the Securities Exchange Act of 1934, and will not be subjected to avoidable liability thereunder. If any provision of the Plan would otherwise frustrate or conflict with the intent expressed in this Section 2.5, that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, such provisions shall be deemed void. SECTION 3. MISCELLANEOUS 3.1 AMENDMENT AND TERMINATION OF PLAN. While the Company expects and intends to continue the Plan, the Board reserves the right at any time and in any way to amend, suspend or terminate the Plan, PROVIDED, HOWEVER, that the Board may not, without further approval by the shareholders of the Company, materially increase the number of shares of Stock which are subject to the Plan, materially modify the requirements for eligibility as a Participant under the Plan or materially increase the benefits accruing to Participants under the Plan. Notwithstanding the immediately preceding sentence, to the extent that, in the opinion of counsel to the Company, stockholder approval of an amendment to the Plan is not required under the Securities Exchange Act of 1934 (including the rules and regulations promulgated thereunder) in order for the Plan to continue to satisfy the applicable requirements for exemption from the operation of Section 16(b) of the Securities Exchange Act of 1934, such amendment may be made by the Board acting alone. No amendment of the Plan shall without such Participant's written consent, except as permitted by Section 2.5, materially and adversely affect any right of any Participant with respect to any deferral election theretofore made under the Plan or any right of a Prior Plan Participant in respect of amounts deferred thereunder. 3.2 APPLICABLE LAW. The Plan shall be construed and administered in accordance with the laws of the State of New York. 3.3 DIRECTOR STATUS. The Plan will not give any Participant the right to continue as a director of the Company, or any right or claim to any benefit under the Plan unless such right or claim has specifically accrued under the terms of the Plan. 3.4 GENDER AND NUMBER. Where the context requires, words in any gender shall include any other gender, words in the singular shall include the plural and words in the plural shall include the singular. 3.5 ADJUSTMENTS FOR CERTAIN CHANGES IN CAPITALIZATION. If the Company shall at any time increase or decrease the number of its outstanding shares of Stock or change in any way the rights and privileges of such shares by means of the payment of a stock dividend or any other distribution upon such shares payable in Stock, or through a stock split, subdivision, consolidation, combination, reclassification, or recapitalization involving the Stock, then the numbers, rights, and privileges of the shares issuable under the Plan shall be increased, decreased, or changed in like manner as if such shares had been issued and outstanding, fully paid, and nonassessable at the time of such occurrence. 3.6 NONASSIGNABILITY. No right to receive payments under the Plan nor any shares of Stock allocated to a Participant shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, Title I of the Employee Retirement Income Security Act of 1974, as amended, or rules thereunder. The designation of a beneficiary by a Participant pursuant to Section 2.3(b) does not constitute a transfer. 3.7 UNSECURED OBLIGATION. Amounts deferred under this Plan, unless and until used to purchase Stock, shall be an unsecured obligation of the Company. EX-10.30 12 EXHIBIT 10.30 Exhibit 10.30 MALLINCKRODT GROUP INC. LONG-TERM INCENTIVE COMPENSATION PLAN (EFFECTIVE JULY 1, 1994) Section 1. PURPOSE. The purpose of the Mallinckrodt Group Inc. Long-Term Incentive Compensation Plan (the "Plan") is to further the long-term growth and profitability of Mallinckrodt Group Inc. (the "Corporation") by offering long- term incentives in addition to current compensation to officers and other key management of the Corporation and its subsidiaries (each, a "Subsidiary"), and to provide such participating employees with an equity position in the Corporation to further align their interests with those of the shareholders of the Corporation. The Plan is intended to provide an incentive compensation opportunity to participating employees of the Corporation and its Subsidiaries which is not subject to the limitation on deductions for federal income tax purposes contained in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and should be construed to the extent possible as providing for remuneration which is "performance-based compensation" within the meaning of Section 162(m) of the Code and Treasury Regulations thereunder. Section 2. ADMINISTRATION; SHAREHOLDER RATIFICATION. (a) The Plan shall be administered by the Organization and Compensation Committee (the "Committee") of the Board of Directors of the Corporation (the "Board"). The Committee is authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations and make such interpretations and determinations as it may deem necessary or advisable for the proper administration of the Plan, and all rules, regulations, interpretations and determinations shall be binding on all participants (as defined below). (b) With respect to each Performance Cycle, the class of eligible participants pursuant to Section 3, the objective performance goals specified pursuant to Section 5, and the maximum award payable to any participant under Section 4, must be disclosed to and approved by the Corporation's shareholders. Section 3. PARTICIPATION. Employees eligible to participate in the Plan shall consist of officers and other key management employees of the Corporation and its Subsidiaries who, in the opinion of the Committee, have significant potential for making substantial contributions to the success of the Corporation and its Subsidiaries. The Committee shall, at the beginning of each Performance Cycle (as defined below), determine, except as otherwise contemplated by the last sentence of Section 4, which of such officers and other key management employees shall participate in the Plan ("Participants") and the terms and conditions of such participation. The Committee shall report to the Board the names, classes (grades), or titles of the eligible Participants and, in general, the terms and conditions applicable to their participation with respect to a Performance Cycle. All employees designated as Participants shall be promptly advised of their participation. Section 4. LONG-TERM INCENTIVE AWARDS. Each designated Participant who is actively employed by the Corporation or a Subsidiary on the last day of a Performance Cycle is eligible to receive a long-term incentive award under this Plan based upon the attainment of objective performance goals established by the Committee for the Performance Cycle under Section 5 hereof. A Participant must be actively employed by the Corporation or a Subsidiary thereof on the last day of a Performance Cycle to receive an incentive award for such Performance Cycle. However, if a Participant's employment is terminated prior to the last day of a Performance Cycle by reason of the Participant's death, disability or Qualified Retirement, the Participant (or Participant's designated beneficiary in the event of his or her death), at the sole discretion of the Committee, shall be entitled to receive an amount determined by multiplying the incentive award which would have been payable had the Participant remained an employee through the last day of the Performance Cycle by a fraction, the numerator of which is the number of days during the Performance Cycle the Participant was employed by the Corporation or one of its Subsidiaries, and the denominator of which is 1,080. For purposes of this Plan, Qualified Retirement means retirement at or after age 55 except that Qualified Retirement shall not include a termination of the Participant's employment by the Corporation for Cause. If a Participant's employment with the Corporation or one of its Subsidiaries begins after the first day of a Performance Cycle, the Participant's incentive award for such Performance Cycle shall automatically be pro-rated utilizing the formula set forth in the preceding sentence. Section 5. PERFORMANCE CYCLE; PERFORMANCE GOALS. (a) For purposes of this Plan, a Performance Cycle shall be a period of three (3) consecutive fiscal years of the Corporation. Prior to the beginning of each Performance Cycle, the Committee will establish, in writing, the objective performance goals applicable to each Participant or class of Participants for the Performance Cycle. The objective performance goals established by the Committee may be expressed in terms of financial, operating or other criteria, or any combination thereof, and may involve comparisons with respect to historical results of the Corporation and its Subsidiaries and operating groups or segments thereof, all as the Committee deems appropriate to achieve the purposes of the Plan as set forth in Section 1 hereof. However, each objective performance goal must be based upon or measured by criteria which would permit a third party, having knowledge of the relevant facts, to determine whether the objective performance goal was satisfied and calculate the amount of the award payable to a Participant. (b) The objective performance goals established by the Committee must preclude the discretion to increase the amount of any award payable to a Participant. However, to the extent permitted under Code Section 162(m) and the Treasury Regulations thereunder, the Committee retains the discretion to eliminate or decrease the amount of any award otherwise payable to a Participant. Notwithstanding any other provision in this Plan, neither any discretion given to the Committee with respect to Participants' incentive awards, -2- or the amount payable thereunder, nor any rights given to the Committee, if any, to adjust criteria or goals relating to an incentive award, may be exercised after a Change in Control which in any way adversely affects the amount of an incentive award for the Performance Cycle in which the Change in Control occurred (or for the immediately preceding Performance Cycle, if payment with respect thereto has not been made before the Change in Control occurs), or any Participant's rights with respect to either such Performance Cycle. Section 6. PAYMENTS. Amounts payable under the Plan shall be paid to Participants as soon as practicable after the end of each Performance Cycle. Amounts payable under this Plan shall be paid by the Corporation as follows: 50% of a Participant's incentive award shall be paid in cash, and 50% of a Participant's incentive award shall be paid by the delivery of that number of shares of the Corporation's common stock, par value $1.00 per share, determined by dividing (i) 50% of the Participant's incentive award by (ii) the average of the means between the highest and lowest prices of the Corporation's common stock for each of the fifteen business days preceding the last day of the Performance Cycle, as reflected in the Composite Tape for New York Stock Exchange issues. Notwithstanding any other provision of this Plan to the contrary, any shares of common stock to be delivered under this Section 6 to any Section 16 reporting persons shall by their terms not be transferable for a period of six (6) months from the date of issuance thereof; provided however, that the six (6) month limitation on transferability shall not extend to any shares delivered to any Participant following a Change in Control of the Corporation. Section 7. CHANGE IN CONTROL. (a) Notwithstanding Section 4 hereof, in the event a Participant's employment with the Corporation is terminated following a Change in Control of the Corporation by reason of (i) a termination by the Corporation without Cause or (ii) a termination by the Participant with Good Reason, then the Participant shall receive the amount which the Participant would have received had the Participant remained an employee of the Corporation or one of its Subsidiaries through the last day of the Performance Cycle in which the Change in Control occurred, with such incentive award to be based on the actual results at the end of the Performance Cycle. (b) For purposes of this Plan, a "Change in Control" of the Corporation shall mean, and be deemed to have occurred, on the date of the first to occur of any of the following: (i) there occurs a Change in Control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8-K, promulgated under the Securities Exchange Act of 1934 (the "Act") as in effect as of the first day of a Performance Cycle or, if neither item remains in effect, any regulations issued under the Act which serve similar purposes; -3- (ii) any "person" (as such term is under in Sections 13(d) and 14(d)(2) of the Act) is or becomes a beneficial owner, directly or indirectly, of securities of the Corporation owning 20% or more of the combined voting power of the Corporation's then outstanding securities, provided however that the event described in this Section 7(b)(ii) shall not be deemed to have occurred by virtue of ownership of any securities of the Corporation by the Corporation or by any employee benefit plan sponsored or maintained by the Corporation; (iii) individuals who, as of the first day of a Performance Cycle, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, PROVIDED HOWEVER that (1) any person becoming a director subsequent to the first day of a Performance Cycle whose election, or nomination for election, by the Corporation's shareholders, was approved by a vote of at least 70% of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this paragraph (iii), considered as though such person were a member of the Incumbent Board, and (2) in the event that after the first day of a Performance Cycle, the Board by a vote of at least 70% of the directors comprising the Incumbent Board shall have reduced or enlarged the size of the Board of Directors or recommended to shareholders such a reduction or enlargement, upon such reduction or enlargement having occurred, the Board of Directors as so reduced or enlarged shall thereupon constitute the Incumbent Board for all purposes including, without limitation, for the purpose of determining what thereafter constitutes the majority or 70% specified above; (iv) the Corporation shall have merged into or consolidated with another corporation, or merged another corporation into the Corporation, on a basis whereby less than 50% of the total voting power of the surviving corporation is represented by shares held by shareholders of the Corporation prior to such merger or consolidation; or (v) the Corporation shall have sold all, or as determined by the Board, substantially all of its assets to another corporation or other entity or person. (c) For purposes of this Section 7 and Section 4, the term "Cause" means (i) the willful and continued failure of a Participant to perform his or her duties with the Corporation (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to the Participant by the Board which specifically identifies the manner in which the Board believes the Participant has not substantially performed his or her duties, or (ii) willful misconduct materially and demonstrably injurious to the Corporation. No act or failure to act by the Participant shall be considered "willful" unless done or omitted to be done by the Participant not in good faith and without reasonable -4- belief that such action or omission was in the best interest of the Corporation. The unwillingness of the Participant to accept any or all of a change in nature or scope of his or her position, authorities or duties, a reduction in his or her total compensation or benefits, a relocation that the Participant deems unreasonable in light of his or her personal circumstances, or other action by or request of the Corporation in respect of his or her position, authority, or responsibility that the Participant reasonably deems to be contrary to this Plan, may not be considered by the Board to be a failure to perform or misconduct by the Participant. Notwithstanding the foregoing, no Participant shall be treated as having been terminated for Cause for purposes of this Plan unless and until there shall have been delivered to the Participant a copy of a resolution, duly adopted by a vote of 70% of the entire Board of Directors of the Corporation at a meeting of the Board called and held (after reasonable notice to the Participant and an opportunity for the Participant and his or her counsel to be heard before the Board) for the purpose of considering whether the Participant has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for Cause hereunder, finding that in the good faith opinion of the Board the Participant has been guilty thereof and specifying the particulars thereof. (d) For purposes of this Section 7, a termination by the Participant will be with "Good Reason" if the resignation of the Participant is for any one or more of the following: (i) the Participant's resignation or retirement is requested by the Corporation other than for Cause; (ii) any significant change in the nature or scope of the Participant's position, authorities or duties from those existing as of the first day of the Performance Cycle; (iii) any reduction in the Participant's total compensation or benefits from those existing as of the first day of the Performance Cycle; (iv) the breach by the Corporation of any provision of this Plan or any other agreement between the Corporation and the Participant; or (v) the reasonable determination by the Participant that, as a result of a Change in Control of the Corporation and a change in circumstances thereafter significantly affecting his or her position, the Participant is unable to exercise the authorities and responsibilities attached to his or her position as such authorities and responsibilities exist as of the first day of the Performance Cycle. Section 8. MISCELLANEOUS. (a) DESIGNATED BENEFICIARY. If a Participant shall die before receipt of all distributions or payments to which he or she is entitled under the Plan, distribution or -5- payment of the amount to which he or she is entitled shall be made to such beneficiary as the Participant shall have designated by an instrument in writing filed with the Vice President-Human Resources of the Corporation or, in the absence of such designation, to the Participant's personal representative. (b) ASSETS. No assets shall be segregated or earmarked in respect of this Plan and no Participant shall have any right to assign, transfer, pledge or hypothecate his or her interest in the Plan. All amounts payable pursuant to the terms of this Plan shall be paid from the general assets of the Corporation. (c) SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance under the Plan an aggregate of one million (1,000,000) shares of Common Stock, which may be authorized but unissued or treasury shares. (d) LIABILITY. No member of the Board shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated or, except in circumstances involving such member's bad faith, gross negligence or fraud, for anything done or omitted to be done by such member. The Corporation will fully indemnify and hold each member of the Board harmless from any liability hereunder, except in circumstances involving such member's bad faith, gross negligence or fraud. The Corporation or the Board may consult with legal counsel, who may be counsel for the Corporation, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel. (e) AMENDMENT OR TERMINATION. Notwithstanding any other provision of this Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however that any such amendment, suspension or termination may not, without the Participant's consent, adversely affect any incentive awards previously made prior to the effective date of such amendment, suspension or termination. Notwithstanding the preceding sentence, no amendment of the Plan shall, without approval of the stockholders of the Corporation, result in the Plan losing its status as a protected plan under Securities and Exchange Commission Rule 16b-3 to the extent applicable. (f) EXPENSES. The Corporation will bear all expenses incurred by it in administering this Plan. (g) WITHHOLDING. The Corporation shall have the right to deduct from any payment to be made pursuant to this Plan or to otherwise require prior to the payment of any amount hereunder or the delivery of shares hereunder, payment by the Participant of any Federal, state or local taxes required by law to be withheld. -6- (h) NO OBLIGATION. Subject to Section 8(e) hereof, neither this Plan nor any awards made hereunder shall create any obligation on the part of the Corporation or any Subsidiary to continue this Plan, or any other existing award plans or policies or to establish or continue any other programs, plans or policies of any kind. Neither this Plan nor any award made pursuant to this Plan shall give any Participant or other employee any right with respect to continuance of employment by the Corporation or any of its Subsidiaries or affiliates or of any specific aggregate amount of compensation, nor shall there be a limitation in any way on the right of the Corporation or any of its Subsidiaries or affiliates by which an employee is employed to terminate such employee at any time for any reason whatsoever, nor shall this Plan nor any award made hereunder create a contract of employment. (i) NO ASSIGNMENT; RESOLUTION OF DISPUTES. Except as otherwise permitted under Section 8(a), no right or interest of any Participant in this Plan shall be assignable or transferable, and no right or interest of any Participant hereunder shall be subject to any lien, obligation or liability of such Participant. In the event any conflicting demands are made upon the Corporation with respect to any payments due as a result of this Plan, provided that the Corporation shall not have received prior written notice that said conflicting demands have been finally settled by court adjudication, arbitration, joint order or otherwise, the Corporation may pay to the Participant any and all amounts due hereunder, and thereupon the Corporation shall stand fully relieved and discharged of any further duties or liabilities under this Plan. (j) SUCCESSORS. The obligations of the Corporation under the Plan shall be binding upon any successor corporation or organization which shall succeed to substantially all of the assets and business of the Corporation and the term "Corporation," wherever used in this Plan, shall include any such corporation or organization after such succession. (k) GOVERNING LAW. This Plan and all actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of New York (regardless of the law that might otherwise govern under applicable New York principles of conflict of laws). (l) SHAREHOLDER APPROVAL. The Plan was adopted by the Board on June 15, 1994. The Plan and any incentive awards granted hereunder shall be null and void if stockholder approval of the Plan is not obtained within twelve (12) months of the adoption of the Plan by the Board. -7- EX-11.1 13 EXHIBIT 11.1 Exhibit 11.1 EARNINGS PER SHARE PRIMARY COMPUTATION Years ended June 30, 1992, 1993, and 1994 ($ in millions except per share amounts)
1994 1993 1992 - ---------------------------------------------------------------------------------------- Basis for computation of earnings per common and common equivalent shares: Earnings (loss) from continuing operations $107.4 $(113.8) $128.8 Dividends on 4% cumulative preferred stock (.4) (.4) (.4) ---------- ---------- ---------- Earnings from continuing operations available to common shareholders 107.0 (114.2) 128.4 Discontinued operations (3.6) (6.0) (1.3) Cumulative effects of accounting changes (80.6) ---------- ---------- ---------- Net earnings (loss) available to common shareholders $103.4 $(200.8) $127.1 ---------- ---------- ---------- ---------- ---------- ---------- Number of common and common equivalent shares: Weighted average shares outstanding 76,809,532 76,269,208 75,983,906 Shares issuable upon exercise of stock options, net of shares assumed to be repurchased 797,884 1,139,460 1,817,567 ---------- ---------- ---------- 77,607,416 77,408,668 77,801,473 ---------- ---------- ---------- ---------- ---------- ---------- Earnings (loss) per common and common equivalent share: Continuing operations $1.38 $(1.48) $1.65 Discontinued operations (.05) (.08) (.02) Accounting changes (1.04) --------- --------- --------- Net earnings (loss) $1.33 $(2.60) $1.63 --------- --------- --------- --------- --------- ---------
EX-11.2 14 EXHIBIT 11.2 Exhibit 11.2 EARNINGS PER SHARE FULLY DILUTED COMPUTATION Years ended June 30, 1992, 1993, and 1994 ($ in millions except per share amounts)
1994 1993 1992 - ---------------------------------------------------------------------------------------- Basis for computation of earnings per common and common equivalent shares: Earnings (loss) from continuing operations $107.4 $(113.8) $128.8 Dividends on 4% cumulative preferred stock (.4) (.4) (.4) ---------- ---------- ---------- Earnings from continuing operations available to common shareholders 107.0 (114.2) 128.4 Discontinued operations (3.6) (6.0) (1.3) Cumulative effects of accounting changes (80.6) ---------- ---------- ---------- Net earnings (loss) available to common shareholders $103.4 $(200.8) $127.1 ---------- ---------- ---------- ---------- ---------- ---------- Number of common and common equivalent shares: Weighted average shares outstanding 76,809,532 76,269,208 75,983,906 Shares issuable upon exercise of stock options, net of shares assumed to be repurchased 882,368 1,139,460 1,880,014 ---------- ---------- ---------- 77,691,900 77,408,668 77,863,920 ---------- ---------- ---------- ---------- ---------- ---------- Earnings (loss) per common and common equivalent share: Continuing operations $1.38 $(1.48) $1.65 Discontinued operations (.05) (.08) (.02) Accounting changes (1.04) ---------- ---------- ---------- Net earnings (loss) $1.33 $(2.60) $1.63 ---------- ---------- ---------- ---------- ---------- ----------
EX-21 15 EXHIBIT 21 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT Year ended June 30, 1994 Certain of Mallinckrodt's subsidiaries at June 30, 1994 are listed below. Collectively these subsidiaries, together with Mallinckrodt, account for more than 90 percent of consolidated net sales, earnings before income taxes from continuing operations, and total assets.
Jurisdiction of Percent Incorporation Ownership - ---------------------------------------------------------------------- Carnforth Ltd. Bermuda 100% Mallinckrodt Holdings (U.S.A.), Inc. Delaware 100% Mallinckrodt, Inc. Delaware 100% Mallinckrodt Chemical, Inc. Delaware 100% Mallinckrodt Medical, Inc. Delaware 100% Fries & Fries, Inc. Delaware 100% Mallinckrodt Veterinary, Inc. Delaware 100% Pitman-Moore International, Inc. Delaware 100% - ----------------------------------------------------------------------
A number of small subsidiaries are not shown. Individually, and in the aggregate, they do not constitute a significant subsidiary. EX-23.1 16 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following registration statements and related prospectuses filed by Mallinckrodt Group Inc. under the Securities Act of 1933 of our report dated August 9, 1994 with respect to the consolidated financial statements and schedules of Mallinckrodt Group Inc. included in this Annual Report on Form 10-K for the year ended June 30, 1994: Commission File No. Form S-8, No. 2 - 65727 Form S-8, No. 2 - 72455 Form S-8, No. 2 - 70868 Form S-8, No. 2 - 90910 Form S-8, No. 2 - 94151 Form S-8, No. 33 - 10381 Form S-8, No. 33 - 32109 Form S-8, No 33 - 40246 Form S-8, No 33 - 43925 Form S-3, No. 2 - 96566 Form S-3, No. 33 - 39837 Form S-3, No. 33 - 47081 ERNST & YOUNG LLP ------------------ Ernst & Young LLP St. Louis, Missouri September 23, 1994 EX-27 17 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL SCHEDULES. 1,000,000 12-MOS JUN-30-1994 JUL-01-1993 JUN-30-1994 88 0 355 11 377 932 1,396 533 2,434 671 522 87 0 11 918 2,434 1,940 1,940 1,037 1,747 0 0 40 171 64 107 (4) 0 0 104 1.33 0
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